The impact of recent changes in the audit regulations and auditing standards on auditors’ judgement and decision making

The auditing profession has experienced significant transformations in the past fifteen years, in efforts to boost public confidence. In particular, auditing standards and corporate law have undergone significant changes. These reforms and changes were driven by large-scale corporate failures, financial scandals and dwindling public confidence in the craft of external assurance. The aim of this thesis is to identify and examine empirically the impact of various factors that may impede the implementation of the numerous reforms in auditing standards and legislations. Specifically, this thesis has undertaken the following four research projects in the domain of audit regulations and auditor judgements: (1) to critically analyse the current audit report reforms and investigate the implications of the changes for the suppliers and users of the financial reports; (2) to examine the factors that affect the materiality judgements of auditors and identify interventions that could mitigate their effects; (3) to examine the factors that influence auditors’ judgements to present key audit matters in an auditor’s reports; and (4) to investigate the extent and causes of differences in audit fees between companies across countries. This thesis employs both qualitative and quantitative research methods to examine the various factors affecting the adoption of new auditing standards and the impact of differences in legislation across countries on audit fees. The findings of this thesis provide evidence that reforms in auditing standards have significant implications for stakeholders such as the users of financial statements and the accounting firms who have to implement the changes. Furthermore, various factors such as personality traits of accountants, pressures from their clients and characteristics of the client have significant effect on the decision-making process and judgements of accountants. Finally, the findings show that differences in legal liability laws, national culture and the quality of audit environment and enforcement of accounting regulations have an impact on audit fees that auditors charge across countries. These findings have important implications for various stakeholders such as the auditing standard-setters and legislators, accounting firms and the users of the financial reports and auditor’s reports.