The audit is performed to give assurance to the public that financial statements are fairly presented. Accurate issuances Audit opinions show how compliant firms are to auditing standards. Receiving an unfavorable audit opinion will signal firms to improve internal control. Given this, it is important for the top management to assess the factors that can lead to misrepresentation of financial statements and result in adverse opinions. The same principle can be applied to government units and offices. With this in mind, the study was performed to investigate the influences of qualitative and quantitative factors on audit opinions received by the local government units, specifically in the Metro Luzon Urban Beltway. Data on citywide audit opinions were gathered from the Commission on Audit’s (COA) website from 2007 to 2017. The paper employed a qualitative response regression model (QRM) through the ordered logit model, to allow the researchers to analyze the presence or absence of influence for every characteristic observed. The results suggest that audit quality is improved through auditor rotation. It further suggests that gender and urbanicity influence the audit opinion received.
Keywords: audit opinion, financial ratios, gender, local government units, urbanicityAdediran, S. A., Alade, S. O., & Oshode, A. A. (2013). Reliability of financial reporting and companies attribute: The Nigerian experience. Research Journal of Finance and Accounting, 4(16), 108–-114. Retrieved from https://www.iiste.org/RJFA/article/viewFile/8291/
American Accounting Association. (1971). Report of the Committee on basic auditing concepts. The Accounting Review, x, xx–xx.
Auditing and Assurance Standards Council. (2009). Philippine standard on auditing 200. Retrieved from https://www.aasc.org.ph/ /PDFs/ISA-200.pdf
Auditing and Assurance Standards Council. (2016). Philippine standard on auditing 700. Retrieved from https://www.aasc.org.ph/new_std_sept2016/PSA%20700%20(Revised)%20-%20clean.pdf
Balaguer-Coll, M., Brun-Martos, M. I., Forte, A., & Tortosa-Ausina, E. (2015). Local governments’ re-election and its determinants: New evidence based on a Bayesian approach. European Journal of Political Economy, 39, 94-108.
Berry Dunn McNeil & Parker, LLC. (n.d.). Why quality audit matters. Retrieved from http://www.berrydunn.com/news-detail/insight-enews-september-2011-why-audit-quality-matters
Blandon, J., & Bosch, J. (2013). Audit firm tenure and qualified opinions: New evidence from Spain. Revista de Contabilidad, 16(2), 118-–125. Retrieved from https://doi.org/10.1016/j.rcsar.2013.02.001
Brollo, F., & Troiano, U. (2016). What happens when a woman wins an election? Evidence from close races in Brazil. Journal of Development Economics, 122, 28–45. Retrieved from https://www.sciencedirect.com/science/article/pii/S0304387816300244
Cainghog, N. (2013, Month day). A part or apart? Political parties and the ordinary Filipinos. ABS-CBN. Retrieved from https://news.abs-cbn.com/focus/03/11/13/part-or-apart-political-parties-and-ordinary-filipinos
Carter, M. (2014). Gender socialization and identity theory. Social Sciences, 3(2), 242-–263. doi:10.3390/socsci3020242
Chaney, B. A., Ph.D., CPA, Mead, D. M., & Schermann, K. R., CGFM, CPA. (2002). The new governmental financial reporting model: What it means for analyzing government financial conditions. The New Governmental Financial Reporting Model: What It Means for Analyzing Government Financial Condition,51(1), 26-31.
Cullinan, C. P., Wang, F., Yang, B., & Zhang, J. (2012). Audit opinion improvement and the timing of disclosure. Advances in Accounting: Incorporating Advances in International Accounting 28(2), 333–-343.
Cyril, S., Oldroyd, J., & Renzaho, A. (2013). Urbanization, urbanicity, and health: A systematic review of the reliability and validity of urbanicity scales. BMC Public Health, 13, 513–-525. Retrieved from https://www.ncbi.nlm.nih.gov /articles/PMC367
Duverger, M. (1999). Political party. In Encyclopedia Britannica. Retrieved from https://www.britannica.com/topic/political-party
Esmaquel, P. (2016). Dominant parties: LP, UNA to get more perks. Retrieved from https://www.rappler.com/nation/politics/elections/2016/129921-liberal-party-una-dominant-parties-election-day
Executive Order No. 561 1991 (EO) s. 1 (Phl).
Foster, B. P., & Shastri, T. (2016). Determinants of going concern opinions and audit fees for development stage enterprises. Advances in Accounting, 33, 68-–84. doi:10.1016/j.adiac.2016.05.001
Fox, R., & Schuhmann, R. (1999). Gender and local government: A comparison of women and men city managers. Public Administration Review, 59(3), 231–xxx. doi: 10.2307/3109951
Francis, J. (2004). What do we know about audit quality? The British Accounting Review, 36(4), 345–-368. https://doi.org/10.1016/j.bar.2004.09.003
Gitman, L., & Zutter, C. (2015). Principles of managerial finance (14th ed.). Boston: Pearson.
Gul, F., Yu Kit Fang, Y. K., & Jaggi, B. (2009). Earnings quality: Some evidence on the role of auditor tenure and auditors’ industry expertise. Journal of Accounting and Economics, 47(X), 265-287. doi:10.1016/j.jacceco.2009.03.001
Habib, A. (2013). A meta-analysis of the determinants of modified audit opinion decisions. Managerial Auditing Journal, 28(3), xxx–xxx. doi: 10.1108/02686901311304349
Labonne, J., Parsa, S., & Querubin, P. (2017). Political dynasties, term limits and female political empowerment: Evidence from the Philippines. SSRN Electronic Journal. doi:10.2139/ssrn.2930380
Lande, C. (1968). Parties and politics in the Philippines. Asian Survey, 8(9), 725–-747. Retrieved from https://www.jstor.org/stable/2642641
Maehr, M. L., & Sjogren, D. D. (1971). Atkinson’s theory of achievement motivation: First step toward a theory of academic motivation? Review of Educational Research, 41(2), 143–-161. Retrieved from https://www.jstor.org/stable/1169490?seq=1#metadata_info_tab_contents
Quick, R., & Schmidt, F. (2018). Do audit firm rotation, auditor retention, and joint audits matter? – An experimental investigation of bank directors’ and institutional investors’ perception. Journal of Accounting Literature, 41(1), 1–-21. https://doi.org/10.1016/j.acclit.2018.01.003
Roxas, M. (2019, February 9). Personal interview.
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2011). Financial accounting theory and analysis (10th Edition ed.). United States: John Wiley and Sons Ltd.
The 1987 Constitution of the Republic of the Philippines - Article XI. Retrieved from https://www.officialgazette.gov.ph/constitutions/the-1987-constitution-of-the-republic-of-the-philippines/the-1987-constitution-of-the-republic-of-the-philippines-article-xi/
Yang, S., Liu, Y., & Mai, Q. (2018). Is the quality of female auditors really better? Evidence based on the Chinese A-share market. China Journal of Accounting Research, x(x), xx–xx. doi:10.1016/j.cjar.2018.07.004