Auditor-client Relationship and Auditor Rotation

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Table of contents

CHAPTER ONE – INTRODUCTION
1.1 INTODUCTION
1.2 PROBLEM BACKGROUND
1.3 RESEARCH QUESTION
1.4 PURPOSE OF THE STUDY
1.5 LIMITATIONS OF THE STUDY
1.6 DEFINITION OF CONCEPTS
1.7 ABBREVIATIONS
1.8 DISPOSITION OF THE STUDY
CHAPTER TWO – THEORETICAL REVIEW
2.1 BACKGROUND TO AUDITING AND ROLE OF AUDITOR
2.2 AUDITOR SIZE AND AUDIT QUALITY
2.3 AUDITOR-CLIENT RELATIONSHIP AND AUDITOR ROTATION
2.4 AUDIT QUALITY THEORY BY WATKINS ET AL.
2.5 NON-AUDIT SERVICES
2.6 TENURE, INDEPENDENCE, AND PERCEPTIONS OF AUDIT QUALITY
2.6.1 Perceptions of investors & information intermediaries about audit tenure
2.6.2 Industry-Specialists’ knowledge
2.7 AGENCY THEORY AND AUDIT QUALITY
2.8 INTERNATIONAL STANDARDS ON AUDITING (ISA)
2.9 AUDITING IN SWEDEN
CHAPTER THREE – RESEARCH METHODOLOGY
3.1 CHOICE OF SUBJECT
3.2 PRE-UNDERSTANDING
3.3 RESEARCH PHILOSOPHY
3.4 PERSPECTIVES
3.5 RESEARCH APPROACH
3.6 RESEARCH DESIGN
3.7 RESEARCH STRATEGY
3.8 DATA COLLECTION
3.8.1 Collection of primary data
3.8.2 Collection of secondary data
3.8.3 Criticism of secondary sources
3.9 SAMPLE SELECTION
3.10 QUALITY CRITERIA
3.10.1 Credibility
3.10.2 Transferability
3.10.3 Confirmability
3.10.4 Dependability
3.11 ETHICAL CONSIDERATIONS
CHAPTER FOUR – EMPIRICAL FINDINGS
4.1 PROFILES OF INTERVIEWEES
4.2 AUDITORS’ OPINION
4.2.1 Long-term auditor-client relationship and its effects on the audit quality
4.2.1.1 Long-term relationship allowing the auditors to have much knowledge
4.2.1.2 Complacency of auditor due to long-term auditor-client relationship
4.2.1.3 Auditor-client relationship and the bilateral monopoly
4.2.2 Role of auditor and audit quality
4.2.2.1 Success of audit in reducing material misstatements
4.2.2.2 Uniform level of audit quality over the years
4.2.2.3 Role of audit-firm size and brand-name in maintaining audit quality
4.2.2.4 Audit quality during the early years of audit engagement
4.2.2.5 Auditor reputation in terms of perceived competence and perceived independence
4.2.2.6 Effects of audit on the information credibility and information quality
4.2.2.7 Perception of investors and information intermediaries about long-term relationship
4.2.2.8 Overcoming the issues of agency problem due to long-term relationship
4.2.3 Auditor rotation
4.2.3.1 Regulations for auditor rotation
4.2.3.2 Cost-benefit analyses of auditor rotation
4.2.3.3 Appointment of the auditor by the regulator rather than the client
4.2.4 Reasons for an audit failure and its consequences
4.2.5 Professional ethics of auditing and auditing standards followed in Sweden
4.2.6 Acquisition of non-audit services from the auditors and its effects on audit quality
4.2.7 Dependence of local audit firm on specific clients
4.2.8 Effects of industry specialization over the audit quality and its fees
4.2.9 Enforcement or sympathizing of the auditor by the client
4.2.10 Concluding opinion about the affect of long-term relationship on audit quality
4.3 CLIENTS’ OPINION
4.3.1 Long-term auditor-client relationship and its effects on the audit quality
4.3.1.1 Long-term relationship allowing the auditors to have much knowledge
4.3.1.2 Complacency of auditor due to long-term auditor-client relationship
4.3.1.3 Auditor-client relationship and the bilateral monopoly
4.3.2 Role of auditor and audit quality
4.3.2.1 Success of audit in reducing material misstatements
4.3.2.2 Appointment of auditor
4.3.2.3 Auditor reputation in terms of perceived competence and perceived independence
4.3.2.4 Consideration of auditor-size and brand-name during the appointment of auditor
4.3.2.5 Effects of audit on the information credibility and information quality
4.3.2.6 Perception of investors and information intermediaries about long-term relationship
4.3.2.7 Overcoming the issues of agency problem due to long-term relationship
4.3.3 Auditor rotation
4.3.3.1 Regulations for auditor rotation
4.3.3.2 Cost-benefit analyses of auditor rotation
4.3.3.3 Appointment of the auditor by the regulator rather than the client
4.3.4 Reasons for an audit failure and its consequences
4.3.5 Role of internal control in ensuring the audit quality
4.3.6 Acquisition of non-audit services from the auditors and its effects on audit quality
4.3.7 Willingness to pay high audit fees for higher audit quality and industry specialization
4.3.8 Enforcement or sympathizing of the auditor by the client
4.3.9 Concluding opinion about the affect of long-term relationship on audit quality
CHAPTER FIVE – ANALYSIS AND DISCUSSION
5.1 LONG-TERM AUDITOR-CLIENT RELATIONSHIP AND ITS EFFECTS ON THE AUDIT QUALITY
5.1.1 Long-term relationship allowing the auditors to have much knowledge
5.1.2 Complacency of auditor due to long-term auditor-client relationship
5.1.3 Auditor-client relationship and the bilateral monopoly
5.2 ROLE OF AUDITOR AND AUDIT QUALITY
5.2.1 Success of audit in reducing material misstatements
5.2.2 Uniform level of audit quality over the years
5.2.3 Role of audit-firm size and brand-name in maintaining audit quality
5.2.4 Audit quality during the early years of audit engagement
5.2.5 Auditor reputation in terms of perceived competence and perceived independence
5.2.6 Effects of audit on the information credibility and information quality
5.2.7 Perception of investors and information intermediaries about long-term relationship
5.2.8 Overcoming the issues of agency problem due to long-term relationship
5.2.9 Appointment of auditor
5.2.10 Consideration of auditor-size and brand-name during the appointment of auditor
5.3 AUDITOR ROTATION
5.3.1 Regulations for auditor rotation
5.3.2 Cost-benefit analyses of auditor rotation
5.3.3 Appointment of the auditor by the regulator rather than the client
5.4 REASONS FOR AN AUDIT FAILURE AND ITS CONSEQUENCES
5.5 ROLE OF INTERNAL CONTROL IN ENSURING THE AUDIT QUALITY
5.6 ACQUISITION OF NON-AUDIT SERVICES FROM THE AUDITORS AND ITS EFFECTS ON AUDIT QUALITY
5.7 RELIANCE OF LOCAL AUDIT FIRM ON SPECIFIC CLIENTS
5.8 PROFESSIONAL ETHICS OF AUDITING AND AUDITING STANDARDS FOLLOWED IN SWEDEN
5.9 EFFECTS OF INDUSTRY SPECIALIZATION OVER THE AUDIT QUALITY AND ITS FEES
5.10 WILLINGNESS TO PAY HIGH AUDIT FEES FOR HIGHER AUDIT QUALITY AND INDUSTRY SPECIALIZATION
5.11 ENFORCEMENT OR SYMPATHIZING OF THE AUDITOR BY THE CLIENT
5.12 CONCLUDING OPINION ABOUT THE AFFECT OF LONG-TERM RELATIONSHIP ON AUDIT QUALITY
CHAPTER SIX – CONCLUSION, RECOMMENDATIONS AND FURTHER RESEARCH
6.1 CONCLUSION
6.2 RECOMMENDATIONS
6.3 FURTHER RESEARCH
REFERENCES
APPENDIX I – INTERVIEW GUIDE FOR AUDITORS
APPENDIX II – INTERVIEW GUIDE FOR CLIENTS