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    Mandatory accounting compliance by Australian mineral resources firms: the affect of auditor independence and specialisation

    149427_Heniro2010.pdf (2.371Mb)
    Access Status
    Open access
    Authors
    Heniro, Joshua
    Date
    2010
    Supervisor
    Prof. Greg Tower
    Prof. Mitchell Van der Zahn
    Type
    Thesis
    Award
    PhD
    
    Metadata
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    School
    School of Accounting
    URI
    http://hdl.handle.net/20.500.11937/830
    Collection
    • Curtin Theses
    Abstract

    The two objectives of this thesis are to investigate the magnitude of compliance with AASB 6 Exploration for and Evaluation of Mineral Resources and AASB 136 Impairment of Assets; and to examine the influence of audit quality on the compliance levels utilising data from 305 Australian mineral resources public listed firms. Consistent with agency theory auditor independence and audit specialisation are considered pivotal determinants of the magnitude of a disclosure compliance index that comprises 62 mandatory disclosure items.Findings reveal there is 76% compliance rate with both AASB 6 and AASB136 by Australian mineral resource listed firms. The average fees paid to the incumbent auditors for non-audit services is AUD $74,183. The ratio of non-audit fees to total fees earned by Australian accounting firms is 26% whilst 53% of the firms engage the services of a specialist auditor.OLS regression analysis reveals a statistically significant negative association between the ratio of non-audit fees to total fees and level of compliance. This suggests that in the Australian mineral resources sector context, large non-audit fees paid to the incumbent auditors seem to influence the auditor‘s independence. Yet, this thesis does not find any evidence that firms that employ services from a specialist auditor result in a higher level of compliance. Additional sensitivity analyses indicate that the results are generally robust across alternative measures.These findings have important implication for accounting bodies, regulators, investors and other interested parties. Based on the findings, regulators could either: (1) do nothing, and allow the market to assess the risk imposed of the non-disclosure made by firms and take necessary action to reflect on the firms‘ market share prices (though such a option is unlikely given tenets of regulation theory); (2) enforce and penalize any non-compliance with the mandatory disclosures via tougher regulations; or (3) indirectly improve the level of compliance by means of auditor independence. The results show auditor independence (i.e., non-audit fees) is significantly associated with magnitude of compliance; regulators could regulate these non-audit services to boost the magnitude of compliance.

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