Audit Failure of New Zealand Finance Companies – an Exploratory Investigation

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aut.relation.endpage305
aut.relation.issue3en_NZ
aut.relation.journalPacific Accounting Reviewen_NZ
aut.relation.startpage279
aut.relation.volume28en_NZ
aut.researcherKabir, Mohammad
dc.contributor.authorKabir, Men_NZ
dc.contributor.authorSu, Len_NZ
dc.contributor.authorRahman, Aen_NZ
dc.date.accessioned2017-09-04T00:21:10Z
dc.date.available2017-09-04T00:21:10Z
dc.date.copyright2016-06-20en_NZ
dc.date.issued2016-06-20en_NZ
dc.description.abstractPurpose The setting of private finance companies that failed in New Zealand during 2006-2012 was characterized by weaker corporate governance and enforcement of securities law. This paper aims to explore audit failure in this setting and examine whether auditors erred in their audits of the failed finance companies and whether the audit failure rate of Big N auditors was different from that of non-Big N auditors. Design/methodology/approach This paper adopts the archival research method and uses three sets of evidence to assess audit failure – the frequency of going concern opinion (GCO) prior to failure, misstatements in the last audited financial statements, and the violation of the Code of Ethics. Findings The study finds that only 41 per cent of the sample companies received the GCO in their last audit prior to failure and provides evidence of material misstatements in the financial statements of a number of failed finance companies that received clean audit opinions prior to failure and breaches of the Code of Ethics by a number of auditors. These results strongly indicate audit failure for a number of failed finance companies. The audit failure rate, however, appears less for Big N auditors than for non-Big N auditors. Practical implications The study draws attention of the stock market regulator and the accounting profession to an area, the audit of private finance companies, that needs better quality audits. Originality/value This paper provides systematic evidence of audit failure in failed finance companies in New Zealand. It also furnishes preliminary evidence of Big N auditors compensating for weaker corporate governance.
dc.identifier.citationPacific Accounting Review, 28(3), 279-305.
dc.identifier.doi10.1108/PAR-10-2015-0043
dc.identifier.issn0114-0582en_NZ
dc.identifier.urihttps://hdl.handle.net/10292/10780
dc.publisherEmerald Insight
dc.relation.urihttp://www.emeraldinsight.com/doi/pdfplus/10.1108/PAR-10-2015-0043en_NZ
dc.rightsCopyright © Emerald Group Publishing Limited, 2016. Authors retain the right to place his/her pre-publication version of the work on a personal website or institutional repository for non commercial purposes. The definitive version was published in (see Citation). The original publication is available at www.emeraldinsight.com (see Publisher’s Version).
dc.rights.accessrightsOpenAccessen_NZ
dc.subjectFinance companies; Audit failure; Audit quality; Institutional environment
dc.titleAudit Failure of New Zealand Finance Companies – an Exploratory Investigationen_NZ
dc.typeJournal Article
pubs.elements-id206533
pubs.organisational-data/AUT
pubs.organisational-data/AUT/Business & Law
pubs.organisational-data/AUT/Business & Law/Accounting
pubs.organisational-data/AUT/Business & Law/Accounting/Accounting PBRF 2012
pubs.organisational-data/AUT/Faculty of Business, Economics and Law
pubs.organisational-data/AUT/Faculty of Business, Economics and Law/Accounting
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