Graduate Department of Accountancy
R180110 SEMINAR ON AUDITING THEORY (1)
Fall 2012
The mission of the Department of Accountancy is to explore and advance theories and
practices in accounting to cultivate competitive professionals with ethical integrity, innovative
capabilities and international perspective to meet business and social needs in the global
economy.
General Program Learning Goals (goals covered by this course are indicated):
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1 Graduates should be able to communicate effectively verbally and in
writing.
2 Graduates should be able to solve problems strategically and should be
creative and innovative in their approach to solving problems
3 Graduates should be proficient in the use of Information Technology
4 Graduates should possess knowledge and computational skills that will
enable them to think critically and analytically
5 Graduates should possess necessary skills and values required of a true
professional
Instructor:
Dr. Hua-Wei Huang
Phone: +886-6-2757575 ext.53423
E-mail: hwawei7@yahoo.com.tw;
Class hour and room: Thursday 14:00~17:00 at 63405
Office: 63305
Office hour: Wednesday 12:00-14:00 and available other times by appointment.
Course Description and Course Objectives:
This seminar attempts to introduce accounting doctoral students to the important issues
faced by the audit market and the accounting profession. Topics to be discussed include
demand and supply of the audit market, audit risk management and client acceptance
decision, audit reputation and auditor choice, audit tenure, and audit independence and
audit and non-audit pricing etc. By completion, you are expected to learn what the relevant
and current audit research issues are, how to identify them, how to conduct a quality audit
study and make a publishable paper.
Content Summary:
Class Schedule (* for class discussion)
Date
Week 1
Subject
Introduction
Reading Assignment
Auditing Research: Issues, Organizations, Databases, Outlets
Week 2
Accounting
1. Zeff, S., 2003. How the U.S. accounting profession got
Profession
and Auditing
ResearchBackground
Reading
where it is today: Part I. Accounting Horizons 17 (3),
pp.189-205.*
2. Zeff, S., 2003. How the U.S. accounting profession got
where it is today: Part II. Accounting Horizons 17 (4), pp.
267-86.*
3. Defond, M. L., and J. R. Francis, 2005. Audit research
after Sarbanes-Oxley. Auditing: A Journal of Practice and
Theory, V. 24, Supplement, pp. 5-30.*
4. William, K. R., 2005. 25 Years of audit deregulation and
re-regulation: What does it mean for 2005 and beyond?
Auditing: A Journal of Practice and Theory, V. 24,
Supplement, pp. 89-109.
5. Kinney, W. 1986. Empirical Accounting Research Design
for Ph.D. Students. The Accounting Review (April):
338-350.
Week 3
Week 4
Demand for
Auditing/
Auditing
Economics
Auditor
Choice
1. Akerlof, G. A. 1970. The market for "lemons": quality
uncertainty and the market mechanism, The Quarterly
Journal of Economics, Vol. 84, No. 3: 488-500.*
2. Chow, C. 1982. The demand for external auditing
services: size, debt, and ownership influence, The
Accounting Review (April): 272-91.*
3. Wallace, W. A., 1987. The economic role of the audit in
free and regulated market: A review, Research in
Accounting Regulation 1: 7-34.*
1. DeAngelo, L., 1981. Auditor size and audit quality.
Journal of Accounting and Economics: 183-199.*
2. Willenborg, M., 1999. Empirical analysis of the economic
demand for auditing in the initial public offerings market.
Journal of Accounting Research, spring, pp. 225-238.*
3. Wang, Q., T. J. Wong, L. Xia. 2008. State ownership, the
institutional environment, and auditor choice: Evidence
from China. Journal of Accounting and Economics, 46,
112-134 *
4. A new working paper discussing auditor specialist.
(Huang, Sun, Young and Dao 2012)
Week5
Audit Risk
Management
1. Johnstone, K. and J. Bedard, 2004. Audit firm portfolio
management decisions. Journal of Accounting Research,
and Client
Acceptance
Decisions
Week 6
Fair Value
Auditing
pp. 659-690.*
2. Choi, J., R. Doogar and A. Ganguly, 2004. The riskiness
of large audit firm client portfolios and changes in audit
liability regimes: Evidence from the US audit market.
Contemporary Accounting Research, winter, pp. 747-85.
3. Bedard, J., D. Deis, M. Curtis and J. Jenkins. 2008. Risk
monitoring and control in audit firms: A research
synthesis. Auditing: A Journal of Practice & Theory. May,
pp.187-218.
4. Blouin, J., B. Grein and B. Rountree. 2007, An analysis of
forced auditor change: The case of former Arthur
Andersen clients, Accounting Review, May, pp.621-650.*
5. A new working paper discussing fraud and credit ratings.
(Huang and Wang 2012)
1. Ettredge M. L, Yang Xu, Han Yi. 2009. Fair value
measurements, auditor industry expertise, and audit fees:
Evidence from the banking industry. SSRN Working
Paper.
2. Badertscher, Burks and Easton. 2012. A convenient
scapegoat: Fair value accounting by commercial banks
3.
Week 7
International
Auditing/CSR
during the financial crisis. The Accounting Review. Vol.
87, No. 1.
A new working paper discussing fair value audits. (Huang
and Lin 2012)
1. Niemi L. 2005. Audit effort and fees under concentrated
client ownership: Evidence from four international audit
firms. International Journal of Accounting, Vol. 40, No. 4,
pp. 303-323.
2. Chen J. J. and H. Zhang. 2011. The impact of regulatory
enforcement and audit upon IFRS compliance: Evidence
from China. European Accounting Review, Forthcoming.
3. Kanagaretnam K., C. Y. Lim and G. J. Lobo. 2011. Auditor
reputation and earnings management: International
evidence from the banking industry. Journal of Banking
and Finance, Vol. 34, No. 10.
4. Michas P. N. 2011. The importance of audit profession
development in emerging market countries. Accounting
Review, Vol. 86, No. 5.
5. A new working paper discussing CSR. (Wang, Feng and
Huang 2012)
Week 8
Other Special 1. Liu L.-L., K. Raghunandan; D. Rama. 2009. Financial
Issues: voting,
restatements and shareholder ratifications of the auditor.
reporting lag,
Auditing 28, pp. 225-240.
culture
2. Krishnan, J., and J. Yang. 2009. Recent trends in audit
report and earnings announcement lags. Accounting
Horizons 23, 265-288.
3. Hope O-K, T. Kang, W. B. Thomas and Y. K. Yoo. 2011.
Culture and auditor choice: A test of the Secrecy
Hypothesis. Journal of Accounting and Public Policy,
Forthcoming.
4. A new working paper discussing culture. (Huang and Lin
2012)
Week 9
Audit Tenure,
Auditor
Rotation , and
Audit Quality
1. Myers, J., L. Myers and T. Omer, 2003. Exploring the term
of the auditor-client relationship and the quality of
earnings: A case for mandatory auditor rotation?
Accounting Review, pp. 779-99.*
2. Ghosh, A. and D. Moon. 2005. Auditor tenure and
perceptions of audit quality. Accounting Review, 80(2), pp.
585-612 *
3. Chen C. Y., C. J. Lin, and Y. C. Lin, 2008. Audit partner
tenure, audit firm tenure, and discretionary accruals: Does
long tenure impair earnings quality? Contemporary
Accounting Research, Vol. 25 No. 2 pp.415-45 *
4. A new working paper discussing CSR and EQ. (Huang
and Lin 2012)
Week 10
Audit Tenure,
Auditor
Rotation ,
1. David, L., B. Soo and G. Trompter, 2009. Auditor tenure
and the ability to meet or beat earnings forecasts.
Contemporary Accounting Research, pp 517-548.*
Auditor
Specialization
and Audit
Quality
2. Chi, W., H. Huang, Y. Liao and H. Xie, 2009, Mandatory
audit partner rotation, audit quality, and market perception:
Evidence from Taiwan, Contemporary Accounting
Research, summer: 359-91 (also discussion by Bamber
and Bamber, 393-402).*
3. Gul, F., S. Fung and B. Jaggi, 2009, Earnings quality:
Some evidence on the role of auditor tenure and auditors’
industry expertise, Journal of Accounting and Economics,
47, 265-87.*
4. A new working paper discussing fee and specialist in
China. (Huang and Chiu 2012)
Week 11
Client
1. Ferguson, A., J. Francis and D. Stokes, 2003. The effects
Importance,
of firm-wide and office-level industry expertise on audit
Auditor
pricing. Accounting Review, pp.429-48. *
Specialization 2. Lim, C. and H. Tan. 2008. Non-audit service fees and audit
and Auditor
quality: The impact of auditor specialization. Journal of
Independence/
Accounting Research, March, pp.199-246.*
ICMW/CEO
3. Li, C., 2009. Does client importance affect auditor
characteristics
independence at the office level? Empirical evidence from
going concern opinions. Contemporary Accounting
Research, spring, pp.201-230. *
4. A new working paper discussing ICMW/CEO. (Wang,
Chiu, Huang, and Lin 2012)
Week 12
Week 13
Corporate
Governance
Auditor
Switch
1. Fan, J. and T. Wong, 2005. Do external auditors perform a
corporate governance role in emerging markets? Evidence
from East Asia. Journal of Accounting Research, pp.
35-72.*
2. Choi, J., T. J. Wong. 2007. Auditor’s governance functions
and legal environments: An international investigation.
Contemporary Accounting Research, 24, pp.13-46 *
5. Abbott, L., S. Parker, G. Peters, and D. Rama. 2007.
Corporate governance, audit quality and Sarbanes-Oxley
Act. The Accounting Review (July): 803-836.*
6. A new working paper discussing audit committee age.
(Dao, Huang and Zhu 2012)
1. Shu, S. 2000. Auditor resignation: Clientele effects and
legal liability. Journal of Accounting and Economics 29:
173-205.*
2. Lu, T. 2006. Does opinion shopping impair auditor
independence and audit quality? Journal of Accounting
and Research 44 (June): 561-583.
3. Lin Y. C. and Y. U. Chou. 2009. The relationship between
audit opinion and auditor change in view of Type I and
Type II errors. Working paper. National Cheng Kung
University. *
4. A new working paper discussing auditor turnover. (Huang,
Week 14
Audit pricing
Robert and Yan 2012)
1. Simunic, D., 1980. The pricing of audit service: theory and
evidence. Journal of Accounting Research, spring: 161-90.
2. Hay, D., W. Knechel, N. Wong, 2006, Audit fees: A
meta-analysis of the effect of demand and supply
attributes, Contemporary Accounting Research, pp. 1-49.
3. Whisenant, S, S. Sankaraguruswamy and K.
Raghunandan, 2003. Evidence on the joint determination
of audit and non-audit fees. Journal of Accounting
Research: 721-44.*
4. A new working paper discussing audit fees and fair values.
(Huang and Lin 2012)
Week 15
Non-audit
service, audit
quality, and
audit
independent
1. Frankel, M., F. Johnson and K. Nelson, 2002. The relation
between auditors’ fees for non-audit services and earnings
management. Accounting Review, pp.71-103. (also the
discussion by Kinney and Libby, pp. 107-114.)*
2. Ashbaugh, H., R. LaFond, and B. Mayhew, 2003. Do
nonaudit services compromise auditor independence?
Further evidence. Accounting Review, pp. 611-39.*
3. Kinney, W., Z. Palmrose and S. Scholz, 2004. Auditor
Week 16
Audit pricing
and Low
balling
independence, non-audit services, and restatements: Was
the US government right? Journal of Accounting
Research, pp. 561-588. *
1. DeAngelo, L. 1981. Auditor independence “low balling”
and disclosure regulation. Journal of Accounting and
Economics 3(August): 113– 127.*
2. Ghosh, A., and S. Lustgarten. 2006. Pricing of initial audit
engagements by large and small audit firms.
Contemporary Accounting Research 23 (2): 333-368.*
3. Lin, Y. C., C. J. Lin, and C. C. Liu. (August, 2008) The
impact of SOX on audit pricing: Audit risk and
compliance risk. Working Paper. National Cheng Kung
University.*
4. A new working paper discussing low balling. (Huang and
Lin 2012)
Week 17
Other topics
about SOX
1. Lennox, C. 2005, Audit quality and executive officers’
affiliations with CPA firms. Journal of Accounting and
Economics, 39, pp 201-231.*
2. Lennox, C., and J. Pittman. 2010. Auditing the auditors:
Evidence on the recent reforms to the external monitoring
of audit firms. Journal of Accounting & Economics 49,
Issues 1-2, Feb: 84-103. (also the discussion by DeFond,
pp. 104-108.)*
3. Klamm, B. K. and M. W. Watson 2009. SOX 404 reported
internal control weaknesses: A test of COSO framework
components and information technology. Journal of
Information Systems 23(2): 1-23.*
4. A new working paper discussing audit committee scholars.
(Chien 2012)
Week 18
Final Exam/
Discussion
Proposal
Presentation
Course Requirement:
For each reading assigned, you ought to be prepared for class discussion. You will
assume the role of discussion leader for the paper you are assigned to present. For the
papers you are not assigned to present, you will become a discussant. To encourage your
participation and help you be ready for class discussion, I’ll collect your written comments,
at least two for each paper that you are not presenting.
In reading an article, you are expected to critically evaluate the following aspects:
motivations/objectives, related literature, research design and methodology, and the
implications of the major conclusions. You are also encouraged to propose alternative
approaches to the research design and possible extension of the work, including the
application to the audit market and accounting profession in Taiwan.
Grading policy:
COMMU
Presentation and class participation
40%
Final
Term paper (proposal)
20%
40%
 Oral Commu./ Presentation
 Written Communication
Presentation
and class
participation
40%
30%
10%
Final Exam
20%
Term paper
(proposal)
40%
30%
30%
CPSI
 Creativity and Innovation
 Problem Solving
 Analytical Skills
20%
10%
10%
20%
10%
20%
30%
10%
LEAD
 Leadership & Ethic
 Social responsibility
GLOB
 Global Awareness
10%
10%
10%
10%
10%
20%
VSP
Values, Skills & Profess.
 Information Technology
 Management Skills
EVALUATION OF RESEARCH PAPER
Title
Date
Author
Name
A. Describe the research problem or question. Evaluate the importance of the research
question to audit practice.
B. Explain the author’s approach to solving the problem.
C. Describe the major findings of the research.
D. Evaluate whether the research methodology was sound.
E. Evaluate whether the research conclusions are valid and relevant.
F. Identify major strengths and weaknesses of the research.
G. Suggest an alternative approach to solving the problem, or a related research issue you
believe to be important. Relate the research to other research we have discussed.