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    Determinants and effects of the internal audit function in microfinance institutions : a global perspective : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Manawatu Campus, New Zealand
    (Massey University, 2022) Omidiji, Abiodun
    This research investigates the determinants and effects of the internal audit (IA) function in microfinance institutions (MFIs) using data from the World Bank’s Microfinance Information Exchange database. The sample is comprised of 1,025 MFIs during the period 2010–2018. MFIs are specialised financial institutions established to provide vital financial services to the poor, and it is of particular interest to identify and understand the determinants of their IA function. Moreover, IA has wider implications for the microfinance industry which is reported to lack effective governance and control mechanisms. This thesis therefore consists of two distinct studies: (i) the study of the determinants of IA function in MFIs; (ii) the study of the association between IA function, loan losses, and financial performance in MFIs. In the first study, I find that as MFIs increase outreach, proportion of female board directors, and level of financial performance, the existence of the IA function in MFIs is advanced. I also find that sensitivity to operational costs can deter MFIs from investing in the IA function. In the second study, I find that the IA function reduces the rate of loan loss occurrence in MFIs. I also find that the IA function improves the financial performance of MFIs through its significant positive effect on institutional operational self-sufficiency. Furthermore, I find that the negative association between loan losses and financial performance is not significantly higher in MFIs without IA, than in those with IA. The IA function therefore both reduces the risk of writing off bad loans and improves profitability, but it cannot solitarily eliminate the adverse impact of loan losses on MFI financial performance. This thesis extends the corporate governance and IA literature by identifying the factors that determine IA existence from the MFI perspective. It also provides evidence of the effect of the IA function on MFI loan losses and financial performance. This thesis reveals the potentiality of the IA function for improving governance and risk management in MFIs and its findings provide policy and practice implications for the microfinance industry, development agencies and governments to consider.
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    Essays on international auditing : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Auckland, New Zealand
    (Massey University, 2021) Sun, Xuan Sean
    This research investigates the determinants of both audit fees and the purchase of non-audit services using multi-country data. In the current globalized economy and in an environment of increased labour mobility, auditors play a crucial role in assuring the quality of financial reporting. At the same time, auditors could provide certain professional non-audit services to their audit clients. Understanding the factors influencing the demand for, or the provision of, audit and non-audit services is of interest to standard setters, corporate governance participants, and both individual and institutional investors, among others. Furthermore, under the current globalized environment, the role played by country-level institutional factors is especially important. This thesis is organized into three essays: (i) workforce environment, labour market flexibility, and audit fees; (ii) a literature review of auditor-provided tax services (APTS, one type of non-audit services); and, finally, (iii) book-tax conformity and the demand for APTS. In Essay One, using a dataset from 30 countries over the period from 2002 to 2017, I examine the effects of audit clients’ workforce environment on audit fees as well as the role that national labour market flexibility plays in this relationship. I find evidence that audit fees are significantly lower for firms with a good workforce environment, suggesting that auditors perceive such clients as less risky; as a result, auditors expend less effort and/or charge a lower risk premium. Furthermore, I find this effect to be stronger for firms in countries with a more flexible labour market. My study contributes to the international audit fee literature by identifying employee welfare as a distinct audit pricing factor, above and beyond the effects of overall corporate social responsibility practices. Essay Two reviews the empirical literature on the determinants and consequences of APTS and provide some directions for future research. I first summarize two theoretical but competing perspectives on the provision of APTS, namely, the knowledge spillover effect and the impaired independence effect. I then review the evolution of APTS-related disclosures and regulations in selected jurisdictions. My review of the determinants of APTS suggests that such decisions are related to the cost-benefit trade-off. I then review the literature on the consequences of APTS. This strand of the literature in the U.S. supports the knowledge spillover effect, but the findings in non-U.S. settings are mixed. The market perceptions of APTS in both the U.S. and non-U.S. settings suggest that market participants react to APTS negatively during uncertain periods, whereas non-archival studies suggest that the perceptions of APTS vary between stakeholder groups and with the types of APTS provided. Finally, Essay Three examines the impact of different levels of required book-tax conformity on audit clients’ demand for APTS. Utilizing a sample from 11 European Union (EU) countries between 2013 to 2019, I find evidence that listed firms in EU countries with a high level of required book-tax conformity are less likely to purchase tax services from their incumbent auditors, and also tend to pay lower tax service fees. Furthermore, I find these effects to be weaker after the implementation of the APTS-related EU Regulation that became effective from 2016. My findings contribute to the APTS literature by identifying a country-level institutional characteristic, i.e., the required level of book-tax conformity, as a potential determinant of appointing incumbent auditors as tax service providers. I also provide preliminary evidence of the effect of relevant EU regulation on changes in the demand for APTS.
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    How do accountants remain relevant? : the future of public practice : a thesis presented in partial fulfilment of the requirements for the degree of Master of Business Studies in Management at Massey University, Manawatū, New Zealand
    (Massey University, 2019) Ogilvie, Angus Stuart
    Small accounting practices in New Zealand are slated to come under increasing stress as computerisation impacts their relevance. Artificial intelligence threatens to undermine any monopoly they possess in terms of specialist knowledge. Whilst firms of all sizes will be impacted, smaller practitioners are likely to be especially vulnerable as they tend to have a singular focus on ensuring their clients are compliant with Inland Revenue. Indeed, they commonly refer to this work as ‘compliance’. This involves bookkeeping, annual accounts production and tax returns, all processes that look set to be automated. Professional bodies within the accountancy discipline are stressing the need to move from providing compliance services to offering business advice. The research question asks how accountants remain relevant during a period of unprecedented technological change to the profession. This thesis uses a mixed-method research methodology to understand the current context that the profession operates in and how accountants in practice perceive their future relevance. Institutional Theory, and the concept of scripting, has been employed in the analysis of the research data to analyse how practitioners are actively considering their future in light of technological change. Accountants in practice perceive a positive future for themselves. The way they organise their practices is likely to change substantially with an increased use of technology and the rise of contractors at the expense of the traditional workforce. One thing is likely: we will need fewer accountants in the future.
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    Determinants and consequence of cost stickiness : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Auckland, New Zealand
    (Massey University, 2020) Costa, Mabel D
    This research investigates the determinants and consequence of cost stickiness using data of publicly listed U.S. firms. Understanding the determinants of cost stickiness and its implications is extremely crucial, since it affects firms’ profitability, consequently, shareholders’ wealth. Moreover, cost management has even wider repercussions for both debt and equity investors in the areas of risk assessment and the trust of customers, employees, and other stakeholders in the community. Therefore, this study is organised into three different research essays: (i) financial constraint and cost stickiness; (ii) trade credit and cost stickiness; and (iii) cost stickiness and firm value. Essay One investigates the association between financial constraints and cost stickiness. Using a large U.S. sample from 1976 to 2016, I find that financially constrained firms exhibit less cost stickiness. I document that such low-cost stickiness supports both “good” and “bad” arguments depending on the managerial motivation, namely: earnings management incentives, agency problem and value-creating potential of SG&A costs. I also investigate whether the association between financial constraints and cost stickiness varies across the economic cycle. I find that low cost stickiness is observed during both economic expansion and economic contraction periods, although it is more pronounced during contraction. As resources drive the cost of a business, and financial constraints affect resource availability, studying cost behaviour of constrained firms makes a valuable contribution to the existing cost stickiness literature. In Essay Two, I examine the relation between trade credit and cost stickiness and further investigate the moderating effects of agency problem, product market competition, and customer concentration. I find that firms using high levels of trade credit exhibit lower cost stickiness and this is prevalent in the high agency problem sub-sample. In addition, in a non-competitive market, where the agency problem arises owing to lack of competition, trade credit plays an external monitoring role by attenuating cost stickiness. However, high customer concentration curtails this monitoring ability of trade credit providers. Finally, in Essay Three, I investigate the association between cost stickiness and firm value, and examine whether the association, if any, is mediated by cost of equity capital and cash flows. Using a large sample of U.S. data, I find a robust negative relationship between cost stickiness and firm value. I then explore whether resource adjustment, managerial expectations, and agency theories of cost stickiness affect the negative relation, and find some support for the agency view. Furthermore, I find evidence that the detrimental impact of cost stickiness on firm value is mediated partially through the cost of equity and cash flow channels. I enrich the cost management literature by integrating cost asymmetry with corporate finance.