The recent turmoil in global financial markets has accentuated the need for a better understanding of the underlying bank risks and their determinants. In response, a vast literature has emerged to analyse this issue in depth. Surprisingly, the role of auditors in monitoring and shaping banks’ risk has not hitherto been considered. Motivated by this, our work examines the role of auditing in shaping the risk exposures of financial intermediaries in G 10 countries. In particular, we address the effect of audit quality on the financial institutions’ market risk. Since institutional and regulatory variables have been reportedly linked to the level of audit quality, we also assess the direct influence of international heterogeneity in bank regulation on the role and effectiveness of auditing activities. The evidence reported in this research is useful in formulating improved banking sector policies.
Audit quality and bank risks under heterogeneous regulations
PETTINICCHIO, ANGELA KATE;POZZA, LORENZO;PROVASOLI, ANGELO;
2011
Abstract
The recent turmoil in global financial markets has accentuated the need for a better understanding of the underlying bank risks and their determinants. In response, a vast literature has emerged to analyse this issue in depth. Surprisingly, the role of auditors in monitoring and shaping banks’ risk has not hitherto been considered. Motivated by this, our work examines the role of auditing in shaping the risk exposures of financial intermediaries in G 10 countries. In particular, we address the effect of audit quality on the financial institutions’ market risk. Since institutional and regulatory variables have been reportedly linked to the level of audit quality, we also assess the direct influence of international heterogeneity in bank regulation on the role and effectiveness of auditing activities. The evidence reported in this research is useful in formulating improved banking sector policies.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.