Macquarie University
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External and inherent factors affecting the judgements of auditors

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posted on 2023-12-12, 04:53 authored by Batul HasanBatul Hasan

Corporate collapses of well-known business giants around the world have led to significant changes in the auditing regulations over the last fifteen years. Revisions to the audit standards have resulted in the standards being more principle-based and less prescriptive, encouraging the application of professional judgement in all aspects of an audit engagement. Consequently, the aim of this thesis is to investigate the factors that affect audit judgements, in wake of the revised standards and ongoing audit reforms. Specifically, this thesis includes three research projects, examining both external and inherent factors affecting the judgements of auditors. The proposed research projects have the following objectives: (1) to examine the influence of inherent auditor characteristics, including gender, experience, rule observance attitudes, and critical thinking disposition, on auditors’ materiality judgements; (2) to investigate the influence of qualitative variables related to debt and not related to debt on auditors’ going concern judgements in the face of varying levels of financial distress of companies; and (3) to explore the influence of the most recent change to the auditing standard ASA 570 Going Concern related to the placement of the going concern paragraph under a new heading and its effect on auditors tendency to issue going concern opinions.

The thesis employs quantitative research methods to examine various factors affecting the judgement of auditors. The first paper examines the role of auditors’ inherent characteristics and their influence on materiality judgements. The results demonstrates that female auditors utilise more qualitative information than male auditors in assessing materiality judgements. In addition, the study finds that auditors with low rule observance attitudes, high critical thinking disposition, and increased audit experience are more likely to make accurate materiality judgements than those with high rule observance attitudes, low critical thinking disposition, and less experience. The fundamental implication of this study is that the influence of auditors’ personality traits must be considered when enacting revisions to the auditing standards with a view to achieving improved audit quality.

The second paper highlights the role of qualitative information in affecting auditors’ going concern judgements. The study illustrates that for a firm in financial distress, mitigating information both related to and not related to debt affects auditors’ going concern judgements. For a company in less financial distress, contrary information related to debt significantly affects auditors’ going concern judgements, however, contrary information not related to debt does not. The primary implication of this study is the probability that auditors may not be using qualitative information judiciously in assessing going concern judgements. In addition, the study also highlights the general reluctance on part of the auditor in issuing going-concern-qualified opinions.

The final paper is based on the most recent revision to the ASA 570 Going Concern. The study illustrates the reduction in the likelihood of issuing unmodified opinions with going concern among the non-Big 4 audit firms post the revision to ASA 570. In addition, it also highlights a lack of consistency between the Big 4 and non-Big 4 audit firms in the amount of information being disclosed in the going concern paragraph. The primary implication of the study lies in the fact that there is a lack of consistency and comparability in the application of the revised auditing standard among the audit firms, consequently, affecting investor decisions made based on the information provided in the going concern paragraph.

Overall, the findings of the thesis indicate ways to improve auditors’ judgements, which will eventually improve the consistency, transparency, and quality of the audit report. The results of this thesis also have substantial implications for regulators, enforcement bodies, standard setters as well as auditing firms.


Table of Contents

Chapter 1: overview of the thesis -- Chapter 2: influence of auditor’s gender, experience, rule observance attitudes, and critical thinking disposition on materiality judgements -- Chapter 3: factors affecting going concern opinions in Australia -- Chapter 4: implications of recent reforms to auditors reporting requirements on going concern in Australia -- Chapter 5: conclusions and implications -- Bibliography – Appendices

Awarding Institution

Macquarie University

Degree Type

Thesis PhD


Doctor of Philosophy

Department, Centre or School

Department of Accounting and Corporate Governance

Year of Award


Principal Supervisor

Parmod Chand

Additional Supervisor 1

Meiting Lu


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