Reform of the audit oversight and stability of the financial market - project funded by the OeNB Jubiläumsfonds
Relevance of the research project:
Auditing is intended to verify the information included in the annual (consolidated) financial statements and thus increase public confidence into financial reports. The stability of the financial markets is harmed by mistakes while preparing and auditing the company’s financial information. An audit is intended to enable a broad group of people to rely on an external verification of the financial statements and therefore enables them to make the financial statements – as a basis for decisions – reliable. As already stated within the first recital of the Audit Regulation (Reg. EU 537/2014), a high quality of the auditing service contributes significantly to the proper functioning of the financial markets. Hence, the scientific analysis of the effects of audit quality onto the financial market stability is essential.
Objective of the research project:
Within our research project we aim to analyse the effects of the reform of the audit market on the stability of the European and Austrian financial markets. The project focusses on external audit quality assurance in light of the new European audit regulations. We like to gain understanding about the effects of the quality of auditing services (which is influenced by (external) quality assurance) and the stability of financial markets. Therefore it is important to examine the regulatory setting. Up to now, researchers mainly provided comparisons of the legal environment for auditor oversight (in Austria and the EU). There only exist few empirical studies on the quality of auditor oversight in the European area. Basically all existing empirical studies use US-American data (mainly from the PCAOB). The relevance of these studies for the Austrian or European area tends to be quite low. Against this background we plan to analyse the effects of the external quality assurance on the audit quality and on the stability of European and Austrian financial markets. The results also should give insights (1) if the intended effects occur, (2) on the implemented methods for audit oversight as well as (3) the differences between different countries’ implementation of audit oversight. Therefore the project should increase understanding about the effect of audit quality on the stability of financial systems (financial markets, financial intermediaries and the financial market’s structure).
Scope of the research project:
The scope of the project, the novelty of the research question and the objects to investigate make it necessary to use differentiated scientific methods such as comparisons of legal norm, analyses of archive data, expert interviews as well as experiments. First of all a comparison of (Austrian and European) legal standards is essential to determine the current state, as well as to suggest further actions to be taken. Further we expect that the use of formal-analytical methods for the depiction of the influences and interrelations also increase the impact of the research project. Following we aim to empirically test the model’s predictions, therefore the use of primary and secondary data as well as statistical methods are necessary. This broad mix of methods ensures a broad and scientifically investigation of the research question concerning the effects of external quality assurance effects audit quality and the stability of financial markets (in Austria and Europe).
Recent research outputs:
Graschitz / Holzknecht (2020): Wie agiert die Abschlussprüferaufsicht in Österreich und Deutschland? Überwachter Markt, Tätigkeiten, Sanktionen; in: Die Wirtschaftsprüfung (in Druck).
Project team:
Sabine Graschitz (Projektleitung)
Simona Holzknecht
Irina Hosp
Stefan Wenter
Former team members:
Melanie Leopold
Matthias Heckel
Links:
https://www.oenb.at/Ueber-Uns/Forschungsfoerderung/Jubilaeumsfonds.html