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«VOLUM E 1 1, N UM B E R 1 I S SN 2 1 6 8 - 0 6 1 2 F L ASH DR I V E I S SN 1 9 4 1 - 9 5 8 9 ON L I N E T h e In s t it ut e f o r Bu s i n e s s an ...»

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Background and Sample In this research, we selected a sample of Tunisian Certified Public Accountants (TCPAs), referred here as external auditors. Our questionnaire is realized in two phases. A pre-exploratory survey was conducted among some TCPAs belonging to our sample to adapt different questions to the Tunisian context and improve the measure scales. The second phase consists of the distribution of the final questionnaire by email and via social networks such as Facebook and LinkedIn. We sent 110 questionnaires, we received 59 responses and after excluding incomplete responses. We retained only 52 responses. The variables developed in the survey and used in our analysis are presented in Table 1. Table 2, 3 and 4 details the descriptive statistics of the sample.

GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 299 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 Table 1: Variables in the Study

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Models of the Study We developed two logistics regression models. In the first model, we try to analyze the impact of fair value audit challenges on audit quality. In the second model, we analyze the impact of failures of ISA 540 in its role in mitigating the challenges of audit related to fair value measurements.

Model 1

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Where JV-QD, COMP, MANQ, AB_M_A, AB_CI, POTENT, EXP and BIG6 are the variable defined in Table 1 EXP and BIG6 are control variables.

Model 2 = + + _ + + + , (2) Where

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RESULTS

After verifying the absence of outliers that can skew our statistics and the absence of multicollinearity between the independent variables that are introduced in our regression models, we tested the significance of the coefficients assigned to our variables based on the Wald test. Then, we examined the adequacy and classification of our empirical models.

Model 1: Impact of Fair Value Audit Challenges on Audit Quality

Table 6 presents the logistic regression estimates of Model 1. Wald statistics measures the statistical significance of each regression coefficient. The null hypothesis of this test H0, states that the independent variables have no impact on the dependent variable. We accept H0 if the significance of the Wald statistic is greater than the significance level of 0.05. So, we can conclude from Table 6 that the independent variables (COMP, MANQ, AB_M_A, AB_CI and POTEN) have no impact on audit quality. Thus, hypothesis H1a, H1b, H1c, H1d and H1e are rejected. Therefore, the complexity of fair value measures (H1a); the potential bias of managers (H1b); the lack of technical knowledge on the fair value measurements (H1c); the absence of an active market (H1d) and the absence of specific internal control to fair value measurement (H1e) have no negative impact on the quality of audit.

Table 6: Logistic Regression Parameter Estimates For Model 1

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From Table 6, we can conclude that the model 1 for measuring the impact of fair value audit challenges on

audit quality can be written as follow:

− =. −. +. . . + . +. − . (3) Table 7 measures how well the model can predict the dependent variable based on the independent variables. The percentage of correct classification for affirming that fair value has a negative impact on audit quality is 68.4% and for infirming it is 93.4%. The Overall Percentage classification rate is 84.6%, which is considered as a good classification rate as well as a good predictive power.

Table 7: Classification rate

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The Nagelkerke’s pseudo-R2, which measures the explanatory power of the model, has a value of.610. This means that 61% of the variation of the dependent variable is explained by the model. Hosmer-Lemeshow’s test measures the goodness of fit of a model. Table 8 shows that model 1 fits well with the data. In fact, we accept the hypothesis (H0) that the model is well adjusted since the value χ2 is equal to 8.488 and is significant.

Table 8: Hosmer and Lemeshow Test

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Model 2: Impact of Failures In ISA 540 on Its Role In Mitigating Fair Value Audit Challenges Table 9 presents the logistic regression estimates of Model 2. As mentioned earlier, Wald statistics measures the statistical significance of each regression coefficient. The null hypothesis of this test H0 states that the independent variables have no negative impact on the dependent variable. We accept H0 if the significance of the Wald statistic is greater than the significance level of 0.05. So, we can conclude from Table 9 that the independent variables (RISQ and EST_VAL) have no negative impact on the role of ISA 540 in mitigation fair value audit challenges. This explains that 88.5% of the respondents think that ISA 540 makes a positive contribution to the quality of audit, 11.5% think otherwise. Thus, hypothesis H2a and H2b are rejected. Therefore, failures of audit risk procedures in ISA 540 and the lack of guidelines for equally valid assumptions in ISA 540 have no negative impact on its role in mitigating fair value audit challenges and in its role in mitigating fair value audit challenges.

Table 9: Logistic Regression Parameter Estimates for Model 2

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From Table 9, we can conclude that the model 2 for measuring the impact of failures of ISA 540 in its role

in mitigating the challenges of audit related to fair value measurements can be written as follow:

= −. −. + . −. − . (4) Table 10 measures how well the model can predict the dependent variable based on the independent variables. The percentage of correct classification for affirming that fair value has a negative impact on audit quality is 54.5% and for infirming it is 87.8%. The Overall Percentage classification rate is 80.8%, which is considered as a good classification rate as well as a good predictive power.

Table 10: Classification rate

–  –  –

The Nagelkerke’s pseudo-R2, which measures the explanatory power of the model, has a value of.382. This means that 38% of the variation of the dependent variable is explained by the model. Hosmer-Lemeshow’s test measures the goodness of fit of a model. Table 11 shows that model 2 fits well the data. In fact, we accept the hypothesis (H0) that the model is well adjusted since the value χ2 is equal to 7.812 and is significant.

Table 11: Hosmer and Lemeshow Test

–  –  –

The objective of this work is to collect the TCPAs views on the impact of the adoption of IFRS, particularly, the impact of the fair value measurements on the quality of audit as well as the impact of the contribution of ISA 540 (Revised and Redrafted) on the quality of audit. The results of our statistical analysis show that, according to TCPAs, the five challenges of auditing fair value measurements, namely, the complexity of fair value measures; the potential bias of managers; the lack of technical knowledge on the fair value measurements; the absence of an active market and the absence of specific internal control to fair value measurement have no negative impact on the quality of audit. In other words, according to the TCPAs, the benefits of the fair value outweigh its disadvantages. In addition, the ISA 540 (Revised and Redrafted) gives auditor all the necessary tools to face the challenges of auditing at fair value. However it seems that there are convergence issues in Tunisia with this standard.

CONCLUSION

This research aims to test the impact of fair value audit challenges on audit quality and the impact of failures in ISA 540 (revised and redrafted) on its role in mitigating fair value audit challenges in the Tunisian context. The result of our study shows that, according to the auditors interviewed, no fair value audit challenge has a negative effect on audit quality. One can speculate that fair value is perceived as engendering technical difficulties for auditors. However, it is seen as an essential feature and its advantages overcome its disadvantages. These results are consistent with those of Kumarasiri and Fisher (2011). In fact, they found that Sri Lankan auditors perceive fair value as an essential feature, allowing managers to select the models that best suit their business despite the lack of an active market and the lack of experience as well as the additional audit fees involved in the context of developing countries.

This study shows that according to the auditors interviewed, no fair value audit challenge has a negative effect on audit quality. In fact, 53.8% of the respondents think that it is appropriate to introduce the standards of fair value in Tunisia, against 46.2% who think the opposite. Based on our statistical analysis, the failures of risk assessment procedures and the lack of guidelines for equally valid estimates in ISA 540 (revised and redrafted) have no negative impact on the role played by this standard in mitigating audit challenges in fair value. 78.8% of the respondents believe that ISA 540 (revised and Redrafted) plays a significant role in mitigating fair value audit challenges. Only 21.2% believe that this role is not sufficient.

This explains why 88.5% of our respondents think that the ISA 540 (revised and Redrafted) makes a positive contribution to audit quality, while 11.5% think the opposite. The present research can be extended to identify challenges and obstacles that prevent Tunisian Certified Public Accounts (TCPAs) to comply with ISA 540 (revised and redrafted) specifically, and with international auditing standards generally. In addition, it will be interesting to identify the political and economic factors that may influence how fair value is measured and disclosed in the financial statements in the Tunisian context.

GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 304 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1

REFERENCES

Ball, R., (2006). “International Financial Reporting Standards (IFRS): Pros and cons for investors”, Accounting and Business Research, International Accounting Policy, volume 36, p. 5-29.

Ball, R., Kothari, S. P. & Robin, A., (2000). “ The effect of international institutional factors on properties of accounting earnings”, Journal of Accounting and Economics, volume 29, p. 1-52.

Barth, M. E., Landsman, W. R. & Lang, M. H., (2008). “International Accounting Standards and Accounting Quality”, Journal of Accounting Research, volume 46, n°3, p.467-498.

Bartov, E., Goldberg, S. R. & Kim, M., (2005). “Comparative value relevance among German, US and international accounting standards. A German stock market perspective”, Journal of Accounting, Auditing and Finance, volume 20, n°2,p. 95-119.

Canadian Public Accountability Board (CPAB), (2012). “Review post-implementation of clarified ISAs” Fisher, R. & Kumarasiri, J., (2011). “Auditors Perceptions of Fair Value Accounting: Developing Country Evidence”, International Journal of Auditing, volume 15, p.66-87.

Griffith, E. E., Hammersley, J. S., & KADOUS K., (2012). “Auditing Complex Estimates: Understanding the Process Used and Problems Encountered.” Working Paper. University of Georgia, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1857175.

Jeppesen, K. K. & Van Liempd, D., (2011). “Fair Value and the Missing Correspondence Between Accounting and Auditing”, working papers, http://www.lse.ac.uk/accounting/pdf/liempdandjeppesen.pdf.

Laux, C. & Leuz, C., (2009). “The crisis of fair-value accounting: Making sense of the recent debate”, Accounting, Organizations and Society, volume 34, p.826-834.

Leuz, C., Verrecchia, R., (2000).”The economic consequences of increased disclosure”, Journal of Accounting Research, volume 38, p. 91-124.

Martin, R., Rich, J. & Wilks, J., (2006). “Auditing fair value measurements: a synthesis of relevant research”, Accounting Horizons, volume 20, n° 3, p 287–303.

Montague, N. R., (2010). “The Effects of Directional Audit Guidance and Estimation Uncertainty on Auditor Confirmation Bias and Professional Skepticism When Evaluating Fair Value Estimates”, doctoral thesis, University of South Florida.

Sikka, P., (2009). “Financial crisis and the silence of the auditors”, Accounting, Organizations and Society, volume 34, pp. 868-873.

Zimmermann, J., Gontcharvo, I., (2003). “ Do accounting standards influence the level of earnings management? Evidence from Germany”, working papers, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=386521.

BIOGRAPHY



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