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Preference Of The Listed Entities Regarding The Selection Of The External Auditor

Author

Listed:
  • Fulop Melinda Timea

    (Babes Bolyai, Stiinte Economice si Gestiunea Afacerilor)

  • Tiron-Tudor Adriana

    (Babes Bolyai, Stiinte Economice si Gestiunea Afacerilor)

  • Span Georgeta Ancuta

    (Babes Bolyai, Stiinte Economice si Gestiunea Afacerilor)

  • Popa Irimie Emil

    (Babes Bolyai, Stiinte Economice si Gestiunea Afacerilor)

Abstract

The present research aims to highlight the importance of the external auditing in supporting corporate governance and the preference of the listed entities to be audited by the big audit companies. Given the proposed objectives of the research, our scientific method is based on a deductive approach from general to particular that combines quantitative and qualitative studies. The role of the external audit was analyzed by conducting a study of literature on two levels: a theoretical-conceptual level in terms of economic theories and an empirical-practical level based on literature from which we extracted through a content analysis the defining elements of the audit work quality. Falling within the scope of the study, we evaluated the preference of the listed entities to be audited by the Big Four. To this end we used the content analysis of the publicly posted audit reports for the period 2005-2009. Our research results show that although we are a country with an emerging capital market development, the entities in the I-st category on the Bucharest Stock Exchange tend to an audit conducted by one of the big audit companies. Another result arising from our study is that the entities of the I-st category on the Bucharest Stock Exchange become more transparent from a year to another. Whether for the year 2005 we find only 12 audit reports publicly posted, in 2007 we can find 21 audit reports publicly posted. The trend of the large entities audited shows that the preference of the entities to be audited by one of the Big Four is higher from a year to another. The preparation of the financial statements and their audit must be done according to regulations for the currently period. The presumption found in the literature according to which the large entities are audited by the big audit companies which provide higher audit quality is confirmed in the case of our national country as well.

Suggested Citation

  • Fulop Melinda Timea & Tiron-Tudor Adriana & Span Georgeta Ancuta & Popa Irimie Emil, 2011. "Preference Of The Listed Entities Regarding The Selection Of The External Auditor," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 503-509, December.
    • Handle: RePEc:ora:journl:v:1:y:2011:i:2:p:503-509
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    References listed on IDEAS

    as
    1. Clive S. Lennox, 1999. "Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(7&8), pages 779-805.
    2. Francis, Jere R., 2004. "What do we know about audit quality?," The British Accounting Review, Elsevier, vol. 36(4), pages 345-368.
    3. Jan Barton, 2005. "Who Cares about Auditor Reputation?," Contemporary Accounting Research, John Wiley & Sons, vol. 22(3), pages 549-586, September.
    4. Clive S. Lennox, 1999. "Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(7‐8), pages 779-805, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    external audit; audit report; opinion; listed companies; Big Four;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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