Cristina Fuentes
Universitat de València, Accounting, Faculty Member
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This paper examines the economic consequences associated with an audit failure in the field of statutory auditing services, by analyzing changes in the audit firm’s market share around the time of the investigation process undertaken by... more
This paper examines the economic consequences associated with an audit failure in the field of statutory auditing services, by analyzing changes in the audit firm’s market share around the time of the investigation process undertaken by the Spanish Public Oversight Board. We explore the variations in audit market share by applying the difference in differences method to a treatment group of 70 sanctioned audit firms and a matched control group of 70 non-sanctioned audit firms. The period of analysis covers the years from 1999 to 2015. Our results show that the sanctioned audit firms suffered a significant decrease in their relative number of clients. Moreover, this measure of market share decreased not only after the publication of the sanction disclosure (which may be attributed to reputational losses) but also after the initiation of the investigation (which may be attributed to the firm’s reluctance to audit risky clients). Findings are similar for both small and large firms when...
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This study aims to identify the main determinants of audit failure and contribute to the current debate raised by recent European Union regulation on auditor’s tenure and economic policies to prevent impairment of auditor’s independence.... more
This study aims to identify the main determinants of audit failure and contribute to the current debate raised by recent European Union regulation on auditor’s tenure and economic policies to prevent impairment of auditor’s independence. We approach audit failure through auditing enforcement releases triggered by the investigations conducted by the Spanish public oversight board. The sample of sanctioned individual auditors and audit firms covers the period 2002 to 2013. Our results reveal that audit failure likelihood increases when the probability of financial distress is higher, the auditor is permissive of upward earnings management, and the audit report is signed by an individual auditor. The results reveal a positive association between auditor tenure and audit failure only for individual auditors. The relative economic weight of the auditor–client is also positively associated with audit failure, plausibly because audit firms are more concerned with reputation loss tied to bi...
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We analyse trends in inflation-adjusted audit and non-audit fees from 2003 to 2009 with the aim of identifying the impact of International Financial Reporting Standards (IFRS) in Spain, where (a) the shift from national to international... more
We analyse trends in inflation-adjusted audit and non-audit fees from 2003 to 2009 with the aim of identifying the impact of International Financial Reporting Standards (IFRS) in Spain, where (a) the shift from national to international accounting standards represented major changes and (b) the implementation process was conducted in 2005 for group accounts of listed companies and 2008 for the individual accounts. To that end, we build a well-tested audit and non-audit fee model based on 2003 and compare the actual with the predicted values had the accounting reforms not taken place. We report unexpected higher audit fees for the group accounts model in the years 2004, 2005 and 2006. A plausible explanation for these results is the incremental audit costs associated with the mandatory IFRS adoption. Similarly, the unexpected increment in 2008 for parent company audit fees is feasibly associated with the new domestic accounting rules. The behaviour of non-audit fees is more erratic a...
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EL OBJETIVO DE ESTA TESIS DOCTORAL ES ANALIZAR EL IMPACTO DE ALGUNOS DE LOS FENOMENOS ECONOMICOS OCURRIDOS EN LOS ULTIMOS OCHO ANOS, SOBRE LA CONFIGURACION Y EL FUNCIONAMIENTO DEL MERCADO DE AUDITORIA ESPANOL. EN LA PARTE EMPIRICA SE... more
EL OBJETIVO DE ESTA TESIS DOCTORAL ES ANALIZAR EL IMPACTO DE ALGUNOS DE LOS FENOMENOS ECONOMICOS OCURRIDOS EN LOS ULTIMOS OCHO ANOS, SOBRE LA CONFIGURACION Y EL FUNCIONAMIENTO DEL MERCADO DE AUDITORIA ESPANOL. EN LA PARTE EMPIRICA SE EXPONE UN ESTUDIO CUYO OBJETIVO ES ANALIZAR SI LA DEBACLE DE ANDERSEN, A RAIZ DEL ESCANDALO FINANCIERO ENRON, TUVO REPERCUSION SOBRE LOS PRECIOS DE LOS TITULOS DE LAS EMPRESAS AUDITADAS QUE COTIZAN EN EL MERCADO CONTINUO. LA METODOLOGIA UTILIZADA HA SIDO EL ESTUDIO DE EVENTOS, Y LA ESTIMACION DE LOS RETORNOS ANORMALES SE HA REALIZADO A TRAVES DEL MODELO DE MERCADO, LOS RESULTADOS OBTENIDOS PARA LAS DOS FECHAS DE EVENTOS ANALIZADAS INDICAN QUE EL MERCADO BURSATIL ESPANOL NO REACCIONO ANTE ESTE SUCESO. EL SEGUNDO OBJETIVO FUE ANALIZAR LAS CONSECUENCIAS DE LAS FUSIONES ENTRE PRICEWATERHOUSE Y COOPER&LYBRAND Y ANDERSEN Y DELOITTE & TOUCHE, SOBRE LA CONFIGURACION DEL MERCADO FORMADO POR EMPRESAS SOMETIDAS A REGULACION DE LA CNMV. LOS RESULTADOS OBTENIDOS MUE...
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Ongoing regulatory efforts aim to link managerial compensation with a firm’s performance. However, little is known about whether and how Corporate Social Responsibility (CSR) goals are considered in the design of the managerial... more
Ongoing regulatory efforts aim to link managerial compensation with a firm’s performance. However, little is known about whether and how Corporate Social Responsibility (CSR) goals are considered in the design of the managerial compensation scheme. This paper addresses this research question by analyzing a sample of Spanish listed firms for the period spanning 2013–2018. The outcomes of the regressions suggest that there is a positive relationship between CSR and the managerial compensation, but this relationship is significant only with lower levels of CSR. The study also reveals that CSR is positively associated with the proportion of equity-based compensation and, therefore, negatively associated with the proportion of cash-based compensation. In all, our results suggest that firms with lower levels of CSR, likely following social pressures, seek to improve their investments in CSR; and, in doing so, they design a managerial compensation scheme that incentivizes the manager to me...
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espanolEste estudio pretende identificar los determinantes principales del fallo del auditor y contribuir al debate actual sobre la duracion del contrato y la independencia del auditor, tras la reciente regulacion por la Union Europea. Se... more
espanolEste estudio pretende identificar los determinantes principales del fallo del auditor y contribuir al debate actual sobre la duracion del contrato y la independencia del auditor, tras la reciente regulacion por la Union Europea. Se identifica el fallo del auditor con la sancion impuesta por el ICAC tras una investigacion. La muestra de sanciones a auditores individuales y firmas de auditoria abarca el periodo 2002-2013. Nuestros resultados revelan que la probabilidad de que el auditor cometa una infraccion aumenta cuando la empresa cliente tiene mas dificultades financieras, el auditor es mas permisivo hacia practicas de gestion del resultado que aumentan los beneficios y el informe esta firmado por un auditor individual. Los resultados tambien muestran una asociacion positiva entre la duracion del contrato y el fallo del auditor, pero unicamente en el caso de auditores individuales. El peso economico relativo del auditor-cliente tambien esta asociado de forma positiva al fal...
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The aim of this study is to examine whether the provision of non-audit services by the incumbent auditor compromises auditor independence in a low litigation risk environment such as in the case of Spain, where the audit litigation risk... more
The aim of this study is to examine whether the provision of non-audit services by the incumbent auditor compromises auditor independence in a low litigation risk environment such as in the case of Spain, where the audit litigation risk is not likely to be the main external deterrent for audit malpractices. To achieve this goal we analyse whether audit and non-audit fees are simultaneously determined, and we also test whether the joint provision of audit and non-audit services reduces the incidence of qualified audit reports. Confirming prior research, when running single equation models the results obtained are supportive of the presence of knowledge spillovers between the two services. Nevertheless, we also empirically establish that audit and non-audit fees are jointly determined and when applying a simultaneous-equation model, then, the flows of knowledge spillovers cannot be proved. We also find that auditors are not less likely to issue qualified audit reports when they jointl...
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Purpose The purpose of this paper is to identify whether Latin American (LA) firms are adopting any hedging strategy when designing foreign exchange risk (FXR) measures. To that end, the authors explore the impact of several drivers of... more
Purpose The purpose of this paper is to identify whether Latin American (LA) firms are adopting any hedging strategy when designing foreign exchange risk (FXR) measures. To that end, the authors explore the impact of several drivers of FXR management. Design/methodology/approach The sample consists of 342 non-financial listed firms established in a group of representative countries of the LA region and covers the period from 2008 to 2016. Hypothesis testing is performed through a Logit model that measures the likelihood to adopt hedging practices. In addition, a Tobit test offers further insights into the derivatives users. Findings The authors corroborate capital structure-related hypotheses such as tax goals, financial distress, liquidity and growth opportunities. In addition, both ownership concentration and income tax payable seem to be negative and significant determinants of FXR coverage. Originality/value Results reported in this study are relevant for the LA region with high...
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Purpose: The purpose of this paper is to identify whether Latin American (LA) firms are adopting any hedging strategy when designing foreign exchange risk (FXR) measures. To that end, the authors explore the impact of several drivers of... more
Purpose: The purpose of this paper is to identify whether Latin American (LA) firms are adopting any hedging strategy when designing foreign exchange risk (FXR) measures. To that end, the authors explore the impact of several drivers of FXR management. Design/methodology/approach: The sample consists of 342 non-financial listed firms established in a group of representative countries of the LA region and covers the period from 2008 to 2016. Hypothesis testing is performed through a Logit model that measures the likelihood to adopt hedging practices. In addition, a Tobit test offers further insights into the derivatives users. Findings: The authors corroborate capital structure-related hypotheses such as tax goals, financial distress, liquidity and growth opportunities. In addition, both ownership concentration and income tax payable seem to be negative and significant determinants of FXR coverage. Originality/value: Results reported in this study are relevant for the LA region with ...
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ABSTRACT This study aims to identify the main determinants of audit failure and contribute to the current debate raised by recent European Union regulation on auditor’s tenure and economic policies to prevent impairment of auditor’s... more
ABSTRACT This study aims to identify the main determinants of audit failure and contribute to the current debate raised by recent European Union regulation on auditor’s tenure and economic policies to prevent impairment of auditor’s independence. We approach audit failure through auditing enforcement releases triggered by the investigations conducted by the Spanish public oversight board. The sample of sanctioned individual auditors and audit firms covers the period 2002–2013. Our results reveal that audit failure likelihood increases when the probability of financial distress is higher, the auditor is permissive of upward earnings management, and the audit report is signed by an individual auditor. The results reveal a positive association between auditor tenure and audit failure only for individual auditors. The relative economic weight of the auditor–client is also positively associated with audit failure, plausibly because audit firms are more concerned with reputation loss tied to big scandals than succumbing to economic pressure from their clients.
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The purpose of this paper is to present the some differences and similarities between corporate governance principles in Islamic banks and conventional banks by paradigmatic diversification. Since Corporate governance in Islamic banks is... more
The purpose of this paper is to present the some differences and similarities between corporate governance principles in Islamic banks and conventional banks by paradigmatic diversification. Since Corporate governance in Islamic banks is a social phenomenon in Islamic societies, the paper uses social theory paradigms (functionalist, interpretive, radical humanist and radical structuralist) to compare between corporate governance in Islamic banks and conventional banks. This paper demonstrates that mainstream corporate corporate governance theories are not a law of nature but a social construct.
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This paper explores the necessary and sufficient conditions of good Corporate Governance practices for high risk disclosure by firms in their Corporate Governance Annual Report. Additionally, we explore whether those recipes have changed... more
This paper explores the necessary and sufficient conditions of good Corporate Governance practices for high risk disclosure by firms in their Corporate Governance Annual Report. Additionally, we explore whether those recipes have changed during the financial crisis. With a sample of 271 Spanish listed companies, we applied fuzzy-set qualitative comparative analysis to a database of financial and non-financial data. We report that Board of Directors independence, size, level of activity and gender diversity, CEO duality, Audit Committee independence, being audited by the Big Four auditing firms and the presence of institutional investors are associated with high risk disclosure. The conditions included in almost every combination are the presence of institutional investors and being audited by the Big Four. We found similar combinations for 2006 and 2012, while the analysis for 2009 showed the lowest number of causal configurations.
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This meta-analysis incorporates the results from 34 separate studies examining fee models for consultancy services whereby the consulting firm provides both audit and advisory services to its customers. The findings indicate a number of... more
This meta-analysis incorporates the results from 34 separate studies examining fee models for consultancy services whereby the consulting firm provides both audit and advisory services to its customers. The findings indicate a number of key determinants of consultancy bills: client size, audit fees, auditors being from a “Big Audit Firm,” client's financial difficulties, and prior experience with the legal auditors. Conversely, the meta-results fail to correlate the variable of interest with several constructs commonly used in consultancy models such as the auditee's inherent risk, the client's financial debt, or the audit opinion. The study also explores the influence of three moderators: the Sarbanes–Oxley Act, the legal environment, and the type of statutory auditor. The overall moderator results are robust but fail to group prior data into homogeneous sets. The findings are relevant for policy makers, audit scholars, and stakeholders.
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ABSTRACT
ABSTRACT
We analyse trends in inflation-adjusted audit and non-audit fees from 2003 to 2009 with the aim of identifying the impact of International Financial Reporting Standards (IFRS) in Spain, where (a) the shift from national to international... more
We analyse trends in inflation-adjusted audit and non-audit fees from 2003 to 2009 with the aim of identifying the impact of International Financial Reporting Standards (IFRS) in Spain, where (a) the shift from national to international accounting standards represented major changes and (b) the implementation process was conducted in 2005 for group accounts of listed companies and 2008 for the individual accounts. To that end, we build a well-tested audit and non-audit fee model based on 2003 and compare the actual with the predicted values had the accounting reforms not taken place. We report unexpected higher audit fees for the group accounts model in the years 2004, 2005 and 2006. A plausible explanation for these results is the incremental audit costs associated with the mandatory IFRS adoption. Similarly, the unexpected increment in 2008 for parent company audit fees is feasibly associated with the new domestic accounting rules. The behaviour of non-audit fees is more erratic and likely influenced by the auditors’ independence regulation enacted in 2002. We only identify significant prediction errors in 2008 for group accounts. Total fees exhibit significant increases in 2005 and 2008 for group accounts and 2008 for parent company accounts. Our results are robust to different additional tests.
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As a result of the publication of the Code of Corporate Good Governance in 1998, known as the Olivencia Code, some companies voluntarily created an audit committee, after the recommendation of the Code in which all companies, especially... more
As a result of the publication of the Code of Corporate Good Governance in 1998, known as the Olivencia Code, some companies voluntarily created an audit committee, after the recommendation of the Code in which all companies, especially listed, were encouraged to create them. Therefore, the aim of this work is to analyse which factors are associated with voluntary audit
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This paper investigates whether listed Spanish companies audited by Andersen have suffered any negative economic impact due to the scandal surrounding Andersen’s work in Enron Corporation. To that end, we have measured the economic... more
This paper investigates whether listed Spanish companies audited by Andersen have suffered any negative economic impact due to the scandal surrounding Andersen’s work in Enron Corporation. To that end, we have measured the economic consequences, if any, of Andersen’s loss of reputation by examining the reaction in terms of movements in the stock prices of its client companies using an
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The purpose of this paper is to analyse the relationship between the likelihood that a company will receive a qualified audit report (as a measure of the quality of financial information) and the existence and characteristics of the audit... more
The purpose of this paper is to analyse the relationship between the likelihood that a company will receive a qualified audit report (as a measure of the quality of financial information) and the existence and characteristics of the audit committee (AC). For listed ...
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Abstract: In this study, we attempt empirically to investigate the relationship between audit quality and the probability that a financially distressed company would receive a going-concern opinion. Auditor decision-making in the presence... more
Abstract: In this study, we attempt empirically to investigate the relationship between audit quality and the probability that a financially distressed company would receive a going-concern opinion. Auditor decision-making in the presence of going-concern uncertainties may be ...
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This paper explores how UK MNCs assess their foreign subsidiary operating managers' performance in parent company currency terms using operating budgets. It shows how... more
This paper explores how UK MNCs assess their foreign subsidiary operating managers' performance in parent company currency terms using operating budgets. It shows how managers' performance evlauation systems may become dysfunctional if the management of currency risk is centralized at the parent company headquarters and the impact of these centralized currency risk decisions on operating performance is subsequently ignored when