The Impact of the Spanish Financial Act (44 vertical bar 2002) on audit quality

• Type: Article in International Scientific Journal
• Date: 2012

Authors

de las Heras, E (Author) Other; Canibano, L (Author) Other; Moreira, JA (Author) FEP

Journal

Title: Revista Espanola de Financiacion y Contabilidad

Vol. 41 No. 156

Pages: 521-546

ISSN: 0210-2412

Publisher: Taylor & Francis

Indexing

ISI Web of Knowledge - 11 Citations

Scopus - 15 Citations

Other information

Authenticus ID: P-002-4JD

Abstract (EN): This study examines the impact of the FinancialAct 44 vertical bar 2002 (FA henceforth) on audit quality in Spain. Our goal is to provide empirical evidence on whether the audit reforms recommended by the EU and introduced under the FA actually result in higher audit quality. These audit reforms introduce rules and actions to reinforce auditor independence and competence and thus, incentivise audit quality. The public oversight body for the audit profession (the Institute of Accounting and Auditing - ICAC) and the main professional audit body (the Spanish Institute of Chartered Accountants - ICJCE) maintain the view that the changes ensure and increase audit quality (Fernandez and Combarros, 2002;Atares and Canales, 2004). However there is no empirical evidence to support this argument. We empirically test the effect of the FA on audit quality by assessing the ability of auditors to constrain opportunistic earnings management practices. We use data from Spanish companies for the pre- and post-FA periods 2000-2001 and 2003-2004 respectively. The study shows that audit quality has increased after the FA. These results support European recommendations on questions regarding audit regulation.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 26