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The chapter highlights the differences between the audit of private and public companies, particularly considering the demand and supply for audits of private companies, and reviews the empirical literature on private company audits. The review is organized around the concept of audit quality and focuses on studies on the auditors' ability to detect misstatements and auditor independence, as well as on audit quality inferred from proxy measures in private company audit settings. As access to credit can be of vital importance for private companies, we further review the literature investigating the effect of audits on the private clients' access to credit, financing costs, and credit ratings. Finally, we review the literature on the auditor choice of private companies. To identify the relevant current literature, we conducted a systematic literature search. The review reveals that the majority of the current empirical literature on private company audits largely deals with issues that have already been addressed for public companies and does not exploit the unique opportunities that the private sector offers, such as lower market concentration, different incentives for auditors, and overall greater flexibility due to less regulation. We therefore call for more ingenuity in the choice of topics and research designs.

This paper investigates the audit team outcomes of team diversity. Diversity theory suggests that diversity can benefit a team's work quality if the variety of team characteristics improves decision-making and performance. However, team diversity can have harmful affective outcomes if team members separate into different categories, and thus they feel stressed, intend to leave the profession or experience conflict between team members. We investigated this paradox in team diversity in an audit context at a Big 4 audit firm in Sweden, which provided proprietary team data. In addition, 335 individuals from 185 different audit teams responded to a questionnaire. Each participant responded to a survey about their experience with one specific engagement. Results indicated that team diversity benefits the audit team's affective outcomes of role stress, satisfaction and turnover intentions. However, diverse teams also reduce some audit teams' work quality outcomes, such as dysfunctional behaviour, performance, effort and perceptions of audit quality.

This study investigates auditors’ assessment of the quality of their own audit engagements, utilising survey data gathered from a Big Four audit firm in Sweden. We first examine to what extent auditors’ self-reported audit quality threatening behaviours (AQTBs) in the audit process are reflected in their assessment of overall audit quality (OAQ). The results indicate that AQTBs overall and all individual AQTBs are associated with quality assessment, though with variations in their significances. Second, we examine whether AQTBs and OAQ are associated with an auditor’s stakeholder priority, i.e. which stakeholder the auditor considers as her highest priority in the audit work. We find that auditors who consider the employer as the highest priority report more AQTBs. However, priorities are not related to OAQ. Furthermore, auditors prioritising the client or employer tend to assess the overall audit quality as being higher than what the AQTBs would suggest (i.e. they over-assess the quality). Interestingly, the findings regarding priorities are only evident among partners. In sum, the findings of this study provide important insights on how auditors themselves assess their audit quality, and on the role of auditors’ stakeholder priorities.

It is noted that the digital transition, sustainability assurance, and reporting and transformation in regulatory requirements are the three key drivers of transitioning audit teams. This chapter provides a literature review of audit team competence through composition, expertise, and dynamics. We have primarily reviewed established auditing journals for relevant articles in the audit team context. As a result, the future of the transformation auditing that audit teams face is conceptualised, and the chapter provides a visual model to highlight these new ideas. Propositions for future research are suggested about audit team competence through a discussion on composition, expertise, and dynamics.

We examine how the extent and distribution of industry knowledge within an audit team affect audit outcomes. While prior research examining the role of auditors' industry knowledge focuses mainly on audit firms, audit offices, and audit partners, audits are conducted by audit teams. Using an audit framework and proprietary data from a Big 4 firm that includes audit hours for each team member, we find that Big 4 audit teams with higher average industry knowledge are associated with more audit effort. In contrast, we find mixed evidence on the relation between the average hourly internal cost rate and team knowledge. Further, we find that balanced teams, which have at least one team member who qualifies as an industry specialist at both the senior rank and junior rank, produce higher quality audits than teams that have no specialists. In contrast, the audit quality of unbalanced teams, which have a specialist at the senior rank but not the junior rank or vice versa, is not statistically different than teams with no specialists. Overall, our evidence suggests that both the extent and distribution of industry knowledge within a team matter for audit production and that industry knowledge is utilized more effectively when it is spread throughout the team. The findings have useful implications for audit firms and regulators regarding how team composition and industry knowledge affect audit outcomes.

Nous examinons de quelle façon l’ampleur et la distribution de la connaissance du secteur au seind’une équipe d’audit influencent les résultats des audits. Si la recherche menée jusqu’ici sur le rôle de la connaissance du secteur que possèdent les auditeurs met principalement l’accent sur les cabinets d’audit, les bureaux d’audit et les partenaires d’audit, les audits sont dans les faits menés pardes équipes d’audit. À l’aide d’un cadre d’audit et de données exclusives d’un cabinet du Big 4 qui incluent les heures consacrées à l’audit par chaque membre de l’équipe, nous montrons que les équipes d’audit qui possèdent en moyenne une meilleure connaissance du secteur sont associées à un effort d’audit plus soutenu. Par contre, nous dégageons des éléments de preuve mitigés sur la relation entre le coût horaire interne moyen et la connaissance du secteur que possède l’équipe. Enoutre, nous établissons que les équipes équilibrées, c.-à-d., celles comptant un spécialiste du secteur à l’échelon supérieur et un à l’échelon subalterne, produisent des audits de meilleur equalité que les équipes n’ayant pas de spécialistes. À l’opposé, la qualité des audits effectués pardes équipes non équilibrées, qui ont un spécialiste du secteur à l’échelon supérieur ou subalternen’est pas statistiquement différente de celle des audits des équipes dépourvues de spécialistes. Dans l’ensemble, nos données portent à croire que l’ampleur et la distribution de la connaissance du secteur au sein d’une équipe d’audit sont importantes pour la production d’audits, et que la con-naissance du secteur est utilisée plus efficacement lorsqu’elle est partagée par plusieurs membres de l’équipe. Nos résultats ont des répercussions utiles pour les cabinets d’audit et les organismes de réglementation concernant la façon dont est composée l’équipe et la manière dont la connaissance du secteur influence les résultats des audits.

We study the temporal evolution of going-concern reporting from 2004 to 2013 and test whether sanction risk is related to the likelihood of a going-concern opinion using samples of privately held firms. In 2009, the Supervisory Board of Public Accountants (SBPA) in Sweden started to issue significantly more going-concern-related disciplinary sanctions, and we test whether and how auditors at different audit firms adjust their reporting practices (Type I and Type II errors) in response to the increased sanction risk. Our findings reveal that auditors are more likely to issue going-concern opinions to bankrupt and non-bankrupt firms when the sanction risk is higher, suggesting that sanction risk is positively associated with conservatism in auditors’ reporting. Furthermore, we find that auditors at Big 4 firms alter their reporting to conservative more than non-Top 7 firms when sanction risk increases. Finally, results on the informativeness of going-concern opinions indicate that a going-concern opinion increases the bankruptcy probability during both the lower and higher sanction risk periods, but the impact is higher under the higher sanction risk period.

This study investigates audit team stress, its triggers and consequences to provide qualitative evidence about what audit team stress is and how its triggers and consequences can influence team stress and audit quality. Audit teams in three different audit firms, including different audit team ranks, discussed team stress experiences from one specific engagement during group and individual interviews. Audit work can be stressful, and its consequences can threaten audit quality. Additionally, shared team stress differs from individual personal stress. This research discusses how audit team stress, its triggers and consequences can occur at an interteam stress level, when all team members experience the same stress, and at an intrateam stress level, when individuals feel stress from a team experience. Contributions are made to audit literature and practitioners about audit experiences at a team level and its influence on audit quality, including new insights about time budget pressures and auditor affect.

Recent accounting scandals have triggered renewed interest in the debate concerning whether audit firms should be banned from providing consulting services. Compared to the voluminous studies on consulting services to audit clients (i.e., non-audit services, hereafter NAS), little has been done to investigate consulting services to non-audit clients (hereafter CS). This study examines whether audit partners' revenues from CS are associated with: i) partners' compensation, and ii) audit quality (AQ), while controlling for revenues from NAS and auditing. We choose the Norwegian setting because of the unique and proprietary data on CS at the audit partner level. Our results provide initial evidence that partners' compensation is positively associated with their revenues generated from CS. Regarding AQ, our findings indicate no relation between AQ and partners' revenues from CS. This study contributes to the recent debate on multidisciplinary audit firms and should be of interest to regulators, audit firms, and users of audited financial statements.

I denne artikkelen analyserer vi den tiltenkte effekten av revisjonsforordningen om begrensninger i honorar for rådgivningstjenester (537/2014/EU). ³⁷ Den monetære begrensningen på rådgivningstjenester er satt til maksimalt 70 prosent av de siste tre års gjennomsnittlige honorar for lovpålagt revisjon. ³⁸ Vi undersøker hvorvidt målsettingen om økt revisjonskvalitet gjennom reduserte rådgivningstjenester har stadfeste i empiri.

Vi benytter estimerte skjønnsmessige periodiseringer som måleparameter på revisjonskvalitet, ettersom dette er et relevant mål på revisors evne til å begrense ekstreme og opportunistiske regnskapsvalg fra ledelsen (Myers mfl., 2003). For å beregne andelen av estimerte skjønnsmessige periodiseringer har vi benyttet Modified Jones Model, som gjennom empiri har vist seg å være blant de mest anerkjente og brukte som indikasjon på lav regnskapskvalitet (Dechow mfl., 1995). Vi deler inn tre ulike nivåer på estimerte skjønnsmessige periodiseringer: resultatøkende, reduserende og absolutt. Det som skiller denne studien fra tidligere forskning, er blant annet dens rekkevidde. Undersøkelsen gjennomføres for 30 land i Europa, i perioden 2009 til 2015. Som et eksplorativt bidrag deler vi inn i fem ulike strata basert på regnskapsteoretiske likheter mellom nasjonene, og sammenligner mot hovedmodellene. Videre undersøker vi også hvorvidt vårt datasett kan underbygge 70 prosent-grensen på honorar for rådgivningstjenester slik den er fastsatt i revisjonsforordningen.

Vår analyse kan antyde at rådgivningstjenester påvirker revisjonskvalitet negativt. Dette innebærer at en økning i rådgivningstjenester indikerer synkende kvalitet på revisjonen som utføres. Videre kan våre funn tyde på at begrensningen på honorar for rådgivningstjenester antageligvis er satt for høyt.