Which small firm manager will opt out of having a voluntary audit in Sweden?
Abstract: The business world and its perceived complex accounting structure has made a path for audit to acquire a key role in terms of delivering independent opinions considering the management assertions of the financial statements, as well as in assurance and advisory services. Both opinions and services are equally important for managers, owners and stakeholders of companies that are obliged to issue an audit report and for companies that operate in a context where audits are voluntary. There have been many studies and much research done in portraying the demand for audit. Allied to this, it would be interesting to know about the perception and different characteristics of the small firm managers desiring voluntary audit because of the cost and time associated with the auditing of financial statements. Regulation for small firms concerning voluntary audit differs from one country to another. In the context of Sweden, auditing has been voluntary since 2010 for companies that do not exceed two out of the following three requirements (i) Balance sheet total: 1 500 000 SEK, (ii) Net turnover: 3 000 000 SEK, (iii) Number of employees: 3. To explore why some managers chooses to audit and some do not when it is a voluntary choice, we wonder whether there is a relationship between the managers’ characteristics and their decision towards voluntary audit and have formulated a research question as follows: What is the relationship between characteristics of the manager of a small firm and the decision to have financial statements audited? The intention of this thesis is to investigate the characteristics gender, age and work experience of the manager and if it affects the choice of voluntary audit. The base for this thesis stems from relevant and general theories and prior literature that have found differences regarding the behavior of managers in different business activities relating to these characteristics. Such as, theories initiating this study concerns legitimation, upper echelon theory as well as portrays the topic’s importance from an agency perspective. Moreover, the data set for this quantitative thesis have been collected for the empirical and statistical analysis is from the database, Retriever. The accessible data of the small firms we had access to entails all relevant information we use for this study. The findings of this thesis show how one out of our three investigated characteristics show a statistically significant relationship with the decision to audit financial statements when voluntary, more specifically the characteristic gender. Where male top executives, supporting existing research, tend to choose not to audit financial accounts to a higher degree than female top executives. As for the other characteristics, no relationship can with guaranty be said to exist which contributes to the confusion already existing in current literature regarding the effects of age and work experience when making business decisions.
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