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Audit quality and abolition of mandated joint-audits: evidence from Kuwait

Audit quality and abolition of mandated joint-audits: evidence from Kuwait Statistical analysis is based on annual data collected from 132 Boursa Kuwait listed firms from 2016 to 2019 (i.e. yielding 528 firm-year observations). During the observation window (i.e. 2016 to 2019) 116 firms switched from joint-to solo-audits. Level and change models test if audit quality (proxied by abnormal accruals) is impacted by joint-/solo-audit switching. Therefore this paper explores the audit quality following abolition of mandated joint-audits in Kuwait.Design/methodology/approachThis paper investigates the impact on audit quality following abolition of mandated joint-audit requirements in 2016 in Kuwait. The study is differentiated from prior analysis by focusing on an emerging economy setting, and by considering a more expansive set of joint-audit pairings, solo-audit types and switching options.FindingsAbolition of mandated joint-audit requirements prompted a majority of Boursa Kuwait listed firms to switch to solo-audits. Analysis indicates that switch does not significantly decrease audit quality. Also, audit quality changes are not dependent on the specific joint-audit pairing/solo-audit type switch.Research limitations/implicationsAnalysis is based on a single national setting comprising a small set of firms. Nonetheless, results imply the impact of joint-/solo-audit switching following abolition of mandated requirements is more universal with generalizability to different economic settings.Practical implicationsResults indicate that following elimination of mandated joint-audit requirements, firms have a propensity to favor solo-audits. Irrespective of the joint-audit pairing and solo-audit type, findings show a joint-/solo-audit switch does not compromise audit quality.Originality/valueAnalysis is the first to investigate the impact of joint/solo-audit switches on audit quality in an emerging economy with tests considering more joint-audit pairings than assessed previously. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Accounting Research Emerald Publishing

Audit quality and abolition of mandated joint-audits: evidence from Kuwait

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References (82)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0967-5426
DOI
10.1108/jaar-08-2021-0228
Publisher site
See Article on Publisher Site

Abstract

Statistical analysis is based on annual data collected from 132 Boursa Kuwait listed firms from 2016 to 2019 (i.e. yielding 528 firm-year observations). During the observation window (i.e. 2016 to 2019) 116 firms switched from joint-to solo-audits. Level and change models test if audit quality (proxied by abnormal accruals) is impacted by joint-/solo-audit switching. Therefore this paper explores the audit quality following abolition of mandated joint-audits in Kuwait.Design/methodology/approachThis paper investigates the impact on audit quality following abolition of mandated joint-audit requirements in 2016 in Kuwait. The study is differentiated from prior analysis by focusing on an emerging economy setting, and by considering a more expansive set of joint-audit pairings, solo-audit types and switching options.FindingsAbolition of mandated joint-audit requirements prompted a majority of Boursa Kuwait listed firms to switch to solo-audits. Analysis indicates that switch does not significantly decrease audit quality. Also, audit quality changes are not dependent on the specific joint-audit pairing/solo-audit type switch.Research limitations/implicationsAnalysis is based on a single national setting comprising a small set of firms. Nonetheless, results imply the impact of joint-/solo-audit switching following abolition of mandated requirements is more universal with generalizability to different economic settings.Practical implicationsResults indicate that following elimination of mandated joint-audit requirements, firms have a propensity to favor solo-audits. Irrespective of the joint-audit pairing and solo-audit type, findings show a joint-/solo-audit switch does not compromise audit quality.Originality/valueAnalysis is the first to investigate the impact of joint/solo-audit switches on audit quality in an emerging economy with tests considering more joint-audit pairings than assessed previously.

Journal

Journal of Applied Accounting ResearchEmerald Publishing

Published: Jan 13, 2023

Keywords: Joint-audit; Pairing; Solo-audit; Audit quality; Kuwait

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