Article2006

Auditee and audit firm characteristics as determinants of audit qualifications

Constantinos V. Caramanis · Charalambos T. Spathis

94 citations0/0 files storedManagerial Auditing Journal

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Auditing, Earnings Management, Governance Financial Distress and Bankruptcy Prediction Corporate Governance and Financial Management

Abstract

Purpose The objective of this paper is to test the extent to which combinations of financial information with non‐financial variables, such as audit fees and type of audit firm, can be used in predicting qualified and unqualified audit reports. Design/methodology/approach The data were taken from a sample of 185 Greek companies listed at the Athens stock exchange and were analysed using logistic and OLS regression models. Findings It is found that audit fees and the type of audit firm (Big five vs non‐Big five) do not affect auditors' propensity to qualify their opinions. Instead, the occurrence of audit qualifications is associated with financial metrics such as operating margin to total assets and the current ratio. The model developed was successful in classifying 90 per cent of the total sample. Originality/value This study has implications for external auditors, regulators and investors. Also contributes to auditing and accounting research by examining the suggested variables to identify those that can best discriminate cases of audit opinion.

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References

2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature 1981Auditor size and audit quality 1986The theory and practice of econometrics 1981Auditor independence, ‘low balling’, and disclosure regulation 2002Do Non–Audit Service Fees Impair Auditor Independence? Evidence from Going Concern Audit Opinions 2000Does size matter? The influence of large clients on office-level auditor reporting decisions 2000Discretionary-accruals models and audit qualifications 1999Accounting Accruals and Auditor Reporting Conservatism*

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2010Transition to IFRS in Greece: financial statement effects and auditor size 2019Analysis of the relationship between company characteristics and key audit matters disclosed 2018The associations between audit firm attributes and audit quality-specific indicators 2012Auditor’s Perceptions of Financial Reporting Quality: The Case of Greece 2023Improving audit opinion prediction accuracy using metaheuristics-tuned XGBoost algorithm with interpretable results through SHAP value analysis

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