Samenvatting auditing theory

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Samenvatting auditing theory

Agency theory discusses the problems that can exist in the relationship between principles and agents.

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Chow What are a firms incentives to hire external auditing? To help control the conflict of interest among a firms managers, shareholders and bondholders.

The conflict is more severe when the firm has the following characteristict: Manager-shareholder conflict of interests: Shareholder-bondholder conflict of interest: The lower the manager's level of ownership, the higher the demand for audit.

The existence of the independent auditor is not the direct result of government fiat. The appearance of the professional independent auditor was encouraged by changes in U.

Garry Gray - University of Victoria

Fama and Jensen Managerial shareholding can be used as a control mechanism to align interests of managers and shareholders. Jensen and Meckling Due to separation of ownership of a firm and control over the firm, agency costs arise.

Managers with more shares, and thus greater control, have more power and opportunity to act opportunistically An entrenchment effect is expected to dominate when there is intermediate managerial shareholding. There are two agency problems between managers and outside shareholders.

Agency problems are mitigated through contracting, but contracts are often based on accounting numbers prepared by management. Because accounting numbers must be reliable for contracts to be enforced, agency theory predicts a demand for higher-quality auditors when agency problems are more severe.

However, extant studies find no significant or robust relation between management ownership and audit firm size. In contrast to extant research, this study samples unlisted companies rather than listed companies for two reasons.

Consistent with a divergence-of-interests effect, the association between management ownership and audit firm size is found to be significantly negative within low and high regions of management ownership. The association is flatter and slightly positive within intermediate regions of management ownership, suggesting the existence of an opposite entrenchment effect.

The negative association and the nonlinearity is consistent with the finance literature and with the predictions of agency theory. What are agency costs? Efficiency losses that arise when managers do not bear the full consequences of their decisions.

Observing the behaviour and performance of agents. What is the agency theory used for? To examine the effects of managerial shareholding on audit fees.

Samenvatting auditing theory

Managerial shareholding is divided into the regions low, intermediate and high managerial shareholding. What is the definition of auditing? Auditing is the accumulation and avaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria.

Auditing should be done by a competent, independent person. Sirois and Simunic Audits are assumed to generate firm value primarily from three components:Auditing & Assurance Services By Robert J.

Ramsay, This unit examines the theory and practice of auditing and assurance services. The unit focuses on the external Auditing and assurance services - anu Samenvatting Auditing and Assurance Services voor het vak Advanced Auditing.

Summary Auditing. Samenvatting: textabstractIn recent years, the scope of internal auditing has broadened considerably, increasing the importance of internal auditing as part of the organization’s management control structure.

Summary Auditing Theory Chapter book "Principles of Auditing " - Auditing Theory

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Samenvatting auditing theory

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