Dig Here! Extracting and Using Knowledge from Financial Audit Reports

The financial audit report is a valuable tool for ensuring financial transparency and integrity within a company. By presenting the audit results in detail, the report contributes to creating a relationship of trust between the company and its stakeholders. By evaluating procedures and systems, auditors can identify risks and deficiencies within the company, creating the opportunity for company management to act to improve processes by effectively managing resources and achieving set goals. Starting from the premise that by presenting correct and reliable financial information, the audit report provides management and shareholders with a solid basis for making well-informed and substantiated decisions, we set out to analyze the decision-makers’ perceptions of the role and importance of the financial audit for business continuity companies. The research is qualitative, as it is about the realization of a situation survey, based on a questionnaire within several companies, the respondents being their decision-makers. The conclusions of our study can be a starting point for carrying out research in the field, the issue of the reliability of the financial and accounting information presented in the financial reports remains topical, even though digitalization tends to capture the field of accounting and auditing as well, the standardization of information is one of the consequences this process.

To build trust, SMEs must pass on information as clearly as possible, which can be achieved through a transparent financial reporting process. The article aims to study the impact of six accounting quality risk indicators in audit risk assessment from SME audit reports in EU countries, comparing the findings with the analysis of the same indicators at CEECs level. The qualitative research methodology consists of a descriptive study of the risks in the audit reports, emphasizing their types and connection with the company’s characteristics. The study is based on a sample of 443 SMEs listed on the European stock markets and included in the Audit Analytics database, an online platform with information from the company’s financial statements and audit reports. According to the results, the “Audit Fees-Significant Non-Audit Fees” indicator had the highest accounting quality risk impact on SMEs audit reports in the EU. In contrast, for the CEECs companies, the “Audit Fees–Significant Change” index had a more significant impact on the audit reports. The study’s results showed an average trend of 15–16 reported situations per year, with a substantial increase over recent years for CEECs. The main conclusion from the study is that the uncertainties reported by the auditors depend more on the company’s field of activity and how it is managed; therefore, the SME sector should be coordinated according to the accounting regulations regarding the principles and the content of the financial reports. Considering the fast evolution of risks that may affect the audit reports of a small company and the fact that this topic has yet to be thoroughly researched, we find it relevant. The contribution of this article consists of a systematic analysis of the audit risk matrix completing the existing literature, which is why the field can be discussed more widely.

Investment decisions are a process involving the assessment and selection of resource allocation into various types of assets or projects with the aim of achieving desired financial outcomes. The average investment decision phenomenon, proxied by the Price Earning Ratio (PER), shows a fluctuating pattern from 2019 to 2023. This study investigates how financial reports, independent audit reports, and management quality influence investment decisions in Indonesian food and beverage companies. By analyzing secondary data from financial and annual reports of companies listed on the Indonesia Stock Exchange from 2019 to 2023, this study uses a quantitative method. Data were obtained from 12 companies selected through purposive sampling during the 2019–2023 period, resulting in 60 observations. Investment decisions are treated as the dependent variable, while financial reports, audit reports, and management quality serve as independent variables. Data analysis was performed using regression with SPSS 27 software. The study reveals that financial reports have a significant impact on investment decisions, while management quality and audit reports do not. These findings highlight the crucial role of financial reports in investment decision-making, suggesting that investors should focus on financial data rather than evaluating management quality or audit reports.

This research aims to analyze the level of articulation of Local Government Financial Statement (LKPD) and their effects on the quality of LKPD as a basis for local government economic decision making. Data sources used in this research are secondary data and primary data. Secondary data consisting of LKPD documents with Unqualified Opinion. These documents were obtained from the Indonesian Supreme Audit Institutions’s (BPK) Financial Audit Report (LHP) in 2018. Secondary data analysis is carried out using content analysis techniques. The analysis is carried out by comparing the numbers of LKPD based on the set of articulation criteria that were built based on Government Accounting Standards (SAP) and previous research. Primary data consist of semi-structured interviews with local governments which have an articulation rate of less than 100%. Analysis of primary data from interviews is using the Miles and Huberman’s model. Based on the analysis of 443 LKPD documents, it was found that 131 or 30% LKPD had an articulation rate of 100% and 312 or 70% LKPD had an articulation rate of less than 100%. The average level of articulation of LKPD in Indonesia is 83% with the lowest articulation rate of 54%. Based on the results of interview, show that articulation affects the quality of financial statement and influences economic decisions in the the budget preparation process with the function of LKPD as a comparison and prediction tool.

This study examines the determinants that affect the modified opinion on financial audit reports from listed construction enterprises. For this purpose, a quantity research using STATA 14 is set up with a sample of 61 listed construction enterprises on Hanoi stock exchange for the period from the year 2010 to 2018. The result shows that the current modified audit opinion is affected by six determinants are: the prior audit opinion, earnings from the operation, current ratio, company size and time lag (number of days from the ending of the fiscal year and the day of the audit report). After that, the authors raise some suggestions for the users and auditors to assess the suitable issued modified audit opinions.

External quality audits have been introduced in many countries as part of higher education reforms. This article is based on research on 30 Australian universities to assess the extent to which audits by the Australian Universities Quality Agency (AUQA) have improved quality assurance in the core and support areas of the universities. The article analyses the views of 120 respondents including senior members of the universities and some AUQA auditors and evaluates university satisfaction with the external quality audit process. The study finds that the audit process used by AUQA in Australia is satisfactory due to its enhancement-led reviews. The findings indicate that external quality audits alone cannot be credited for improving quality assurance in universities. A combination of external quality audits together with the internal and external operating environment has significantly contributed to improving quality assurance in universities. While external audits have led to an improvement in systems and processes in Australian universities, this study finds that they have not improved education outcomes and the student experience.

The purpose of this study is to examine external auditor's independence related factors (IRF) associated with financial reporting fraud risk assessment (FRFRA). A quantitative instrument was used to measure FRFRA and IRF. In total, 254 external auditors participated in this study. Results found that social relations, and hiring and changing of the auditor are positively and significantly associated with FRFRA. Otherwise economic relations and audit fees are insignificant. This study serves to inform external auditors on how to improve their consideration of FRFRA. It also contributes to the limited body of research on FRFRA within IRF in the emerging economy. New variables were included for external auditors’ independence related factors. These variables consist of social relations, economic relations, and hiring and changing of the auditor. By including these new variables, more contributions are made to the extant literature and more evidence is provided on the results of external auditors in the Republic of Yemen.
 Keywords: Independence related factors, External auditor, Fraud risk assessment, Financial reporting, Yemen.

County governments collect a small percentage of their own source revenue potential and the absorption rate of their budgets are low, this has slowed performance and service delivery. The study sought to find the effect of forensic auditing on the financial performance of the counties in Kenya. Data was collected from financial statements of 45 counties in Kenya in the custody of the controller of budgets for nine years from financial year 2014/2015 to 2022/2023 except Meru and Homabay because financial statements were not found. The study used a dynamic panel model to examine the relationship between forensic auditing and financial performance of all counties in Kenya and analyzed using R statistical tool. The findings showed that forensic auditing has a significant effect on financial performance of counties at first lag. The study concluded that forensic auditing is important and that each county should ensure that they invest in the forensic auditing function. The study recommends that county leadership, including governors, senators, members of the county assembly, and employees, should invest in forensic auditing. The leadership should ensure that accountants are well-trained in forensic auditing processes and consistently apply these skills. All accounting personnel should possess and practice forensic auditing skills. Additionally, county officials should provide supporting evidence for all activities conducted within or outside their counties to facilitate the forensic auditing process. County leadership should focus on spending strictly on budgeted projects, avoiding both overspending and underspending by monitoring ongoing and upcoming projects. Counties should also exhaust all revenue collection avenues and ensure that collected revenue is utilized for its intended purposes to meet collection targets. The study also recommends that the Institute of Certified Public Accountants of Kenya (ICPAK) should ensure its members are equipped with knowledge of forensic auditing by organizing regular training sessions and seminars to support the function. ICPAK should provide recommendations on accounting policies in counties to enhance the quality of financial statements. Furthermore, through ICPAK’s guidance, counties should establish fully functional audit departments and ensure the independence of audit committee members. Keywords: Forensic auditing, financial performance, counties, Kenya

The study provides the empirical analysis of the impact of disruptions in accounting on the financial paradigms of 20 large Ukrainian companies for 2019-2023. The aim of the research is to analyse and explain how these disruptions affect financial performance indicators, such as Return on Assets (ROA), company stability, and market value. The research employed a panel data model, where the dependent variable is the financial performance of the companies and disruptions in accounting are the independent variables. The data were collected from publicly available financial statements, audit reports, and macroeconomic indicators. The study applied a fixed-effect and random-effect regression model to measure the relationship between disruptions in accounting and financial indicators. Company size, industry type, and other macroeconomic conditions (e.g., Gross Domestic Product (GDP) growth) are control variables. Disruptions in accounting have a significant negative impact on financial performance, including restatements, reporting delays, and qualified audit opinions, which causes a decrease in ROA. GDP growth is a macroeconomic factor that positively affects financial performance, while company size mitigates the negative impact of accounting accuracy on performance. The results show that accurate and timely financial reporting is important for maintaining investor confidence and financial stability. This study is one of the first studies to examine how disruptions in accounting affect Ukrainian companies, provides an up-to-date conceptual understanding of the relationship between financial reporting practices and financial performance in a transformational economy.

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In the most cases, there is a difference between the tax declared by companies and the tax determined by tax authorities. The current study, aims the relationship of differences in declared and final taxes with some firm characteristics and corporate governance criteria in companies listed on the Tehran Stock Exchange including 102 listed companies (510 observations). The research hypotheses tested using the multiple linear regression (MLR) along with the generalized panel method of integrated data. The findings of the study indicate that there is a positive and significant relationship between interest expense coverage ratio, earnings before tax (EBT) to revenue ratio, and earnings before tax (EBT) to total assets ratio and differences in declared and final taxes; as a result, the higher the ratios are, the greater the tax wedge will be. Also, according to the results, no significant relationship is observed between differences in declared and final taxes and other variables including firm size and debt ratio, the ownership percentage of the big owner, presence of the state shareholder with minimum influence, independence of the board, and existence of the tax paragraph in financial audit report. DOI: 10.5901/mjss.2015.v6n4p488

The internal audit function, audit committee, and external auditor are three crucial stakeholders of corporate governance that safeguard the quality of financial reporting. In this article, I discuss the interrelationships between these monitoring mechanisms. I also provide insights about what we have learned from academic research about the working relationships between these three governance entities. This article should be of interest to academic researchers as well as to corporate stakeholders, which include management, investors, regulators, and Dewan Komisaris members. Future researchers can make use of this article as they contribute more work in areas related to auditing, monitoring and corporate governance, and financial reporting quality. Insights from this article can also guide corporate stakeholders to assess the effectiveness of the internal audit, audit committee, and external auditors in their organizations.

Financial reporting is the cornerstone of transparency and accountability in corporate governance. For Deposit Money Banks (DMBs), financial statements are particularly important because they provide critical information about liquidity, solvency, risk exposures, and overall financial health. In Nigeria, where banks play a pivotal role in financial intermediation and economic development, the credibility of financial reporting is central to sustaining confidence among depositors, investors, regulators, and the general public (Central Bank of Nigeria, 2022). High-quality financial reporting is characterized by relevance, reliability, comparability, and faithful representation. However, in practice, concerns about earnings management, delayed loss recognition, and poor disclosure practices have cast doubts on the reliability of financial reports issued by Nigerian banks (Okafor & Oghoghomeh, 2020). To strengthen stakeholders’ trust and improve transparency, external auditors play a critical role by independently verifying whether financial statements give a true and fair view. The International Auditing and Assurance Standards Board (IAASB), in response to global calls for more informative auditor reports, introduced International Standard on Auditing (ISA) 701: Communicating Key Audit Matters (KAMs). Effective from December 2016, ISA 701 requires auditors of listed entities to disclose in their audit reports the matters of most significance during the audit of the financial statements. These KAMs typically include complex accounting estimates, valuation judgments, and areas requiring significant auditor attention (IAASB, 2015). The expectation is that KAMs will enhance the communicative value of audit reports, reduce the information gap between auditors and users, and ultimately improve financial reporting quality. Empirical studies on the impact of KAMs have show mixed findings. While some evidence suggests that KAMs improve audit transparency and constrain opportunistic financial reporting (Gold, 2020), other studies argue that disclosures are often boilerplate, generic, and of limited informational value (Sirois, Bédard & Bera, 2018). In Nigeria, preliminary findings show that although auditors comply with ISA 701, many KAM disclosures are repetitive and lack entity-specific insights, raising concerns about their effectiveness in improving reporting quality (Emeh & Appah, 2021). The Nigerian banking sector provides an important context for examining this issue. Banks’ financial reports are complex, involving significant judgment in areas such as loan-loss provisioning, fair value measurement, and impairment assessments. These areas are also among the most frequently reported KAMs, making banks an ideal sector for evaluating the usefulness of KAM disclosures. Moreover, given Nigeria’s history of banking crises, corporate failures, and weak governance, it is crucial to determine whether KAM reporting has achieved its intended objective of enhancing the quality and credibility of financial reporting.

Authoritative standards encourage external auditors to coordinate their efforts with the client’s internal audit function (IAF) as part of a financial statement audit. Academic research on this relationship finds that it has the potential to improve audit quality and efficiency. The objective of this research is to better understand how coordination can impact the external auditor’s decision to rely on the IAF. Prior research has shown that the reliance decision is complex and involves several factors that must be considered simultaneously. In this study, we surveyed external auditors to better understand the benefits of coordinating efforts, the antecedents to successful coordination, and the elements that potentially inhibit external auditors from relying on the work of internal auditors. We find that external auditors are coordinating with the IAF to achieve more efficient and effective audits. The degree of this reliance, however, does vary between audits and is largely dependent upon the perceived competence and objectivity of the IAF as well as effective communication. Our findings are informative to external audit practitioners and their decision to rely on IAFs and work towards a successful arrangement where the integrated audit is applied more efficiently and effectively. This additional insight also helps inform and direct future research into external auditors’ coordination decisions.

PurposeThe authors examine the association between two important audit partner characteristics and the readability of key audit matters (KAMs) disclosed in the audit reports. Specifically, the authors examine how the readability of KAMs is associated with audit partner tenure and workload.Design/methodology/approachThe authors conduct the study in the audit context of Norway and applied the Flesch reading ease scale to measure the readability levels of reported KAMs in the audit reports of companies listed on the Oslo Stock Exchange. Panel data estimation techniques are applied in estimating how partner tenure and workload are associated with the readability of KAMs. In addition, several robustness tests including different measures of KAMs readability and subsample analyses are performed.FindingsThe authors find that audit partner tenure and workload have significant associations with the level of KAMs readability. Specifically, the results show that the reported KAMs become more readable as the audit partner tenure increases but are less readable for partners with more workload. These results appear stronger in subsamples of KAMs typically noted to be more complex and associated with higher risks.Research limitations/implicationsAs KAMs represent the most significant issues in financial statements audit, these results provide important insights to stakeholders on the potential impact of audit partner tenure and workload on KAMs readability. Less readable KAMs could derail stakeholders' desire to bridge the information gap between auditors and users of the audit report. The uniqueness of this study lies in its focus on audit partner characteristics as opposed to the audit firm.Practical implicationsExcessive audit partner workload impairs KAMs readability.Originality/valueAs KAMs represent the most significant issues in financial statements audit, these results provide important insights to stakeholders on the potential impact of audit partner tenure and workload on KAMs readability. Less readable KAMs could derail stakeholders' desire to bridge the information gap between auditors and users of the audit report. The uniqueness of this study lies in its focus on audit partner characteristics as opposed to the audit firm.