The International Auditing and Assurance Standards Board: Insights for developing auditing standards fit for purpose
How auditing functions in contemporary capital markets has been examined extensively with two broad areas of research emerging. The first typically relies on economic and finance theory to explore the link between auditing and agency problems (Watts and Zimmerman, 1983) and to further scientific efforts to evaluate the determinants and consequences of audit quality (Palmrose, 1988; Palmrose, 1997; Knechel et al., 2013; Francis, 2022). This line of research is complemented by efforts to, for example, test the value-relevance of expanded audit reporting requirements (e.g. Lennox et al., 2023); gauge the impact of regulatory interventions on audit quality surrogates (e.g. DeFond and Lennox, 2011) and explore the methodological implications of using market measures in auditing research (e.g. Kacer et al., 2023). A second collection of work deals with auditing as a social construction. It focuses on the relevance of heuristics, ritual and gutfeel for the advancement of assurance practice and the institutionalisation of modern auditing services (Humphrey and Moizer, 1990; Pentland, 1993; Power, 2003). Often relying on case studies, ethnographies and detailed interviews, the aim is to shed light on what Power (1994) refers to as the “black box” of attest functions to highlight limitations, reveal contradictions and promote positive change.
The prior research dealing with auditing as part of the capital market machinery or as a social construction provide the basis for a special issue of Meditari Accountancy Research focused on informing the work of the International Auditing and Assurance Standard Board (IAASB). With the empirical and theoretical groundwork laid by earlier scholars, researchers are well placed to capitalise on a voluminous body of positivist, interpretive and critical literature to reflect on the challenges faced by practitioners, the context in which auditees operate and the needs of different stakeholders. The goal is not only to develop theory or provide further empirical evidence on how auditing currently functions but also to guide the standard-setter in achieving its public interest objectives.
The IAASB’s standards are developed for a range of stakeholders. These include, for example, users and preparers of financial statements, governing bodies, regulators and practitioners. To serve the public interest, the IAASB must take cognisance of competing information needs among stakeholders and the importance of developing assurance standards which:
- promote consistent behaviour and practices among assurance providers in the jurisdictions where the IAASB’s standards are used;
- identify the most relevant business issues and drive effective measures for responding to related risks;
- reinforce the professional judgement, scepticism and other behaviours necessary for maintaining or enhancing public confidence in assurance and
- support effective reporting by facilitating the decisions made by governing bodies, financial capital providers and other stakeholders.
List of topic areas
To assist the IAASB with achieving the above objectives, we call for research dealing broadly with:
- how the notion of the “public interest” should be understood and operationalised by the standard-setter;
- the types of users depending directly or indirectly on the IAASB’s work effort; their information needs and how competing stakeholder demands can be effectively managed;
- the facts and circumstances which can enhance or undermine the IAASB’s contribution to the public interest;
- how the impact on the public interest of specific workplans/projects can be effectively assessed and managed; and
- the extent to which current auditing and assurance standards address public interest considerations or fail to do so.
More specific research topics include, but are not limited to the following:
- analyses of response letters to IAASB’s project proposals, work plans and exposure drafts;
- assurance considerations specific to an organisation’s ability to continue as a going concern, including reporting considerations by assurance providers;
- the implications of the risk of material misstatement due to fraud for the audit of financial statements, including reporting considerations;
- how “fraud” should be understood and addressed in the context of engagements other than the audit of financial statements;
- post-implementation reviews of new and amended auditing standards;
- cases studies illustrating the emergence of alternate forms of assurance or the application of existing assurance standards in novel settings;
- determinants and consequences of the assurance of sustainability reporting;
- assessments of the barriers to or challenges encountered when widening the scope of assurance in the private sector;
- assurance practices in the public or not-for-profit sectors;
- variations in the application of and experiences with the implementation of International Auditing Standards in different contexts/jurisdictions;
- technical and critical examinations of the differences between limited and reasonable assurance and the need for a distinction between “audit” and “assurance”; and
- normative recommendations for advancing assurance theory and practice.
The special issue is not focused on advancing a specific theoretical or conceptual stance on auditing. All appropriate research methods/designs are welcome.
- Closing date for submissions: 31 October 2024
- Expected publication date of special issue: early 2026
All submissions should be made using the journal’s online system, choosing the special issue during submission.
Submissions are made using ScholarOne Manuscripts. Author guidelines must be strictly followed.
Authors should select (from the drop-down menu) the special issue title at the appropriate step in the submission process, i.e. in response to “Please select the issue you are submitting to”.
Submitted articles must not have been previously published, nor should they be under consideration for publication anywhere else, while under review for this journal.
DeFond, M. L. & Lennox, C. S. 2011. The effect of SOX on small auditor exits and audit quality. Journal of Accounting and Economics, 52 (1), 21-40.
Francis, J. R. 2022. Going Big, Going Small: A Perspective on Strategies for Researching Audit Quality. The British Accounting Review, 101167.
Humphrey, C. & Moizer, P. 1990. From techniques to ideologies: An alternative perspective on the audit function. Critical Perspectives on Accounting, 1 (3), 217-238.
Kacer, M., Duboisée De Ricquebourg, A., Peel, M. J. & Wilson, N. 2023. Audit Market Measures in Audit Pricing Studies: The Issue of Mechanical Correlation. European Accounting Review, In press, 1-27.
Knechel, W. R., Krishnan, G. V., Pevzner, M., Shefchik, L. B. & Velury, U. K. 2013. Audit quality: Insights from the academic literature. Auditing: A journal of practice & theory, 32 (Supplement 1), 385-421.
Lennox, C. S., Schmidt, J. J. & Thompson, A. M. 2023. Why are expanded audit reports not informative to investors? Evidence from the United Kingdom. Review of Accounting Studies, 28, 497-532.
Palmrose, Z.-V. 1988. An analysis of auditor litigation and audit service quality. The Accounting Review, 63 (1), 55.
Palmrose, Z.-V. 1997. Audit litigation research: Do the merits matter? An assessment and directions for future research. Journal of Accounting and Public Policy, 16 (4), 355-378.
Pentland, B. T. 1993. Getting comfortable with the numbers: Auditing and the micro-production of macro-order. Accounting, Organizations and Society, 18 (7), 605-620.
Power, M. K. 1994. The Audit Explosion, London, Demos.
Power, M. K. 2003. Auditing and the production of legitimacy. Accounting, Organizations and Society, 28 (4), 379-394.
Watts, R. L. & Zimmerman, J. L. 1983. Agency Problems, Auditing, and the Theory of the Firm: Some Evidence. Journal of Law and Economics, 26 (3), 613-633.