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Audit Quality Review Of The Firms Listed In Tunisian Stock Exchange (TSE)


Task: In this assessment, you will critically review the knowledge management approach followed within the business context of an industry.

The assessment requires you to write a knowledge audit review based on a research article on its reported knowledge audit and management. The review should reflect upon the case study presented in the article and should address the following issues:

  1. Clear identified objectives of the article
  2. The background of the company under investigation
  3. The knowledge audit approach followed in the study
  4. The major findings of the study
  5. A comparison to similar studies

The review should be approximately 1500 words. You need to include at least three references in the review (including at least two academic references). You also need to make sure that the references are cited in the text and the review is free from any grammatical and spelling errors.

You will write the review in an MS Word file with proper headings, sub-headings, and a reference list.

You will be assessed based on your ability to appraise the practices of a knowledge audit to identify knowledge assets and knowledge capabilities within the business context of an industry, as well as the techniques of knowledge capture, knowledge codification and knowledge sharing.


The assessment task of audit quality review is being done on a few firms of the Tunisian Stock Exchange (TSE) between the periods of 2009 to 2011. The basic goal of the study is a consequence of audit quality review on the level of discretionary reports. It is observed through the given case study of the article on TSE listed firms that the discretionary report is improved through audit industry specialization and Big 4 auditors conducting the audit. Hence the objective of discretionary report is achieved through audit industry specialization and audit being conducted by the Big 4 auditors. Even the objective of corporate governance is achieved through self-disclosure of quality data provided in the annual reports of the company. The major objective of this report is to determine the disclosure levels present in theq financial report of the agency Tunisian Stock Exchange (TSE). Further, it will be helpful to observe the connection present between the characteristics of audit standards like Big 4 auditors, joint auditors, industry specialists, etc. and the types of facts that are being disclosed by the agencies. 

Tunisia is among one of the fastest evolving countries with a growing stock market established in 1969 with 83 listed firms in 2016 and major economic changes as of date. Financial disclosure is an unregulated field in Tunisia which helps evaluate the performance of a firm, evaluate future profitability, and so on. Many Tunisian companies are observed not to present all the facts in the financial reports. The sample used in this study consists of 29 listed non-financial companies of the Tunisian Stock Exchange (TSE). 31% of the firms belong to the FMCG sector, 24% belongs to the manufacturing sector, 14% from the consumer services and basic materials sector, 10% belong to the other general business sector, 7% belong to the technology and health activities and firms representing oil and gas constitute 3% (Ahmadi & Bouri 2015).

The audit reputation is dependent on the process of drawing up of the financial statements and detection of fraud in management activities (Gay & Simnett 2018). The audit reputation is established by the audit consultants conducting the audit quality review such as the size of the firm, the number of employees in the firm, and the fees charged by the firm (Barros, Boubaker, & Hamrouni 2013). The audit done by Big 4 indicates a good audit reputation. The existence of Big Four has made the principle of discretionary report non-negotiable for the agencies in the market. To reinforce the independence of auditor’s joint auditors need to be appointed. Joint audits help regain the attention of financial investors. The general finding here is that joint audit has a constructive impact on the level of discretionary report. Expertness of audit firms in a particular sector helps to save the audit costs of the respective firms and also provides good quality of audit service by that audit firm (Benali 2013). The general finding obtained in this study on audit quality review is that industry professionalism has a good impact on the level of discretionary reports. The knowledge audit approach followed is demonstrated through the below explanation. Assessing the degree of the discretionary report is the main point of research in accounting. A self-disclosure made in the annual document without any requirement in the regulation is the most important method to enhance the goodwill of the company and also to guide the stakeholders about the operations of the agency. The marking scheme to determine the level of discretionary declaration in the annual document consists of both weighted and unweighted disclosure index as used by the researchers. A discretionary checklist should be developed. The checklist is developed on the basis of several important corporate governance measures. To evaluate discretionary index a checklist of items is prepared. The checklist is further analyzed while performing audit quality review to ensure that self-disclosure items were similar to the discretionary declaration level of Tunisian companies. The discretionary checklist is made based on the information companies provide in their annual documents (Ali 2014). After the preparation of the register, a mark sheet is developed to assess the level of discretionary reports. The global measure of disclosure is determined by reading the annual report and taking the total score of the index of a firm into consideration. The degree of the discretionary report (VDISCL) for scores that can be attained by the agencies is at par with the total score possible. In the Tunisian context, the reputation of the audit is established it is audited by Big 4 consultants (Ahmadi & Bouri 2015). The value of the external audit will be considered as zero if it is not evaluated by The Big Four. It will also gain one point if evaluated by the Big Four. The joint audit with the audit of 2 audit firms ensures the quality of service in terms of independence and competence. There is a reduction of complicity between managers due to joint audits. The Variable Joint Audit is conducted by “COCOM.” The specialization of the auditor in a particular field helps him to conduct the audit quality review process more smoothly. The variable industry professionalism stets that the report will gain one point of the auditor is a specialist in the market field of the report that is reviewed by him; otherwise, no points will be gained (Cernusca & Balaciu 2015). Firm size: this variable is measured by the natural log of market capitalization. The gearing ratio is evaluated with the help of a debt/equity ratio. The profitability ratio of agency = net income/total equity. The discretionary declaration has been stated as profitable by many academicians and is of great importance for the globalization of organizations in the financial markets. Many studies have been made on the new-world countries but little attention is given on the capital markets of the emerging countries. The standard of self-disclosure in the annual report is the main financial problems discussed today. While initiating audit quality review, proper disclosure of the facts will also help the companies to inform their stakeholder appropriately (Alfaraih & Alanezi 2012).

The findings and discussions are as follows, the outcomes show a mean of discretionary discussion (VDISCL) of 0.42 with a minimum level of disclosure of 0.31 and a maximum level of 0.62. Various studies suggest that on an average 39% of the market agencies appoint the Big 4 as their auditor. 48% of the sample firms appoint joint auditors and 40% auditors are observed to have expertise over the specific field of market. The average size of the organizations (In size) is 7.8113. The mean of leverage (Gear ratio) is 26.196% (Ahmadi & Bouri 2015). The average Return on Assets (ROA) for firm profitability is 10.03%. The correlation matrix states as follows the discretionary report is positive. The discretionary report is negatively correlated to Gear Ratio and Return on Assets (ROA) i.e. firm profitability. This clearly states that the level of unorganized information rises with the increase in leverage and financial performance of the company. The correlation index shows the highest correlation of 0.45 between the discretionary report (VDISCL) and industry specialization (Ahmadi & Bouri 2015).

An audit quality review of the past ten years of data from various developing countries like Malaysia, Kuwait, Turkey, Iran, Egypt, etc. is performed. Each study has shown a confirmed positive relationship between corporate governance and the degree of self-disclosure. There is a confirmed notable relationship between discretionarily disclosing information and the corporate governance structure of the agency (Ahmadi & Bouri 2015). A comparison to similar studies can be made with the Indian stock market that is Bombay Stock Exchange. The Bombay Stock Exchange consists of a measurement index which is Sensex that consists of 30 Listed Companies. Even companies at the Indian stock market do disclosure important information in their annual reports (Ahmadi & Bouri 2015). The annual document of the listed Indian companies consists of an audited Balance Sheet and Profit & Loss Account which gives a clear view of the accounts of the company and the profit & loss account depicts the performance of the companies. The annual report also discusses the corporate governance policies of companies such as Corporate Social Responsibility (CSR) and so on. The annual report also consists of the Director Responsibility Statement and so on. The audit quality review of this report studies the facts and focuses on the Tunisian companies, an ordinary law nation, which is trying to grow in the financial world. The major objective of this report is to analyze the presence of auditing standards and rules of the Tunisian Listed Agencies while making disclosure of the financial statements. More established research states the connections present between the big auditors, joint audit, industry specialization, and the extent of discretionary reports (Elder Randal 2015). The most important objective is conducting an audit for an organization is to remove any kind of false information from the financial statements of a particular agency (Sadegh, Reza & Farzard 2013). The conclusion of the investigation reveals that most of the relationship is supported by a high level of significance. The findings drawn from this investigation reveal that there is a positive relationship between discretionary report and Big 4, industry professionalism of audit firms, joint audit, and industry size. The investigation provides supporting results for a constructive relationship respectively between Big auditors, industry professionalism, and self-disclosure index. The findings of our investigation reveal that high debt levels suffer from low self-disclosure index or even non-transparency of financial disclosure. The main implication of this audit quality review is the audit attribute effect on the self-disclosure level of the Tunisian Stock Exchange firms. Therefore, the subject is quite important for self-disclosure studies. From a theoretical standpoint, there is a good relationship between the audit standard and the level of discretionary reports.

Going by the entire study on the concept of audit quality review, it can be commented that the relationship is backed up with a high degree of importance. The findings that appeared from the investigation indicate a positive link between voluntary disclosure and Big 4, the professionalism of Big 4, and the size of the industry. Furthermore, the study gives supporting evidence for a healthy relationship between the auditors, industry professionalism, and the index of self-disclosure. It has been evident from the analysis that high-level debt is prone to an index of low self-disclosure or non-transparency of the financial disclosure. The overall importance of the study and the analysis indicates the attribute of audit impacts on the disclosure level of the Tunisian Stock Exchange firms. Thereby, the subject holds a high degree of prominence for studies of self-disclosure. From a theoretical aspect, there is a strong link between the audit standards and the pattern of the disclosure in regards with the audit quality review. 

Ahmadi, A & Bouri, A 2015, ‘The Effect of Audit Quality on the Extent of Voluntary Disclosure: Companies Listed in the Tunisian Stock Exchange, audit quality review Journal of the Knowledge Economy, vol. 10, no. 1, pp. 59-73

Alfaraih, M., & Alanezi, F 2012, ‘The Effectiveness of joint auditor requirements in promoting corporate disclosure quality’, Arab Journal of Administrative Sciences vol. 19, no. 2, pp. 245–270.

Ali, A 2014, ‘Ownership structure and voluntary disclosure level in emerging market: evidence from Tunisia’, International Conference on Innovation & Engineering Management, Tunisia, pp. 130-140

Barros, C. P., Boubaker, S., & Hamrouni, A 2013, ‘Corporate Governance and Voluntary Disclosure in France. Audit quality review Journal of Applied Business Research, vol. 29, no. 2, pp. 1–17.

Benali, A 2013, ‘The Shareholders Confidence and Effectiveness of the Joint Auditors: Empirical Validation in the French Context’, International Journal of Business and Management vol. 8, no. 11, pp. 76–84

Cernusca, L & Balaciu, D.E 2015, ‘The Perception of the Accounting Students on the Image of the Accountant and the Accounting Profession’. Journal of Economics and Business Research, vol. 21, no. 1, pp. 7-24.

CPA 2018, The Evolving role and exposure of Audit Committees, audit quality review viewed 8 May 2020,

Elder Randal, J 2015, Audit Firm Rotation, Auditor Specialization, and Audit Quality in the Municipal Audit Context. Journal of Governmental & Nonprofit Accounting, vol. 4, pp. 73–100.

Gay, G., & Simnett, R 2018, Auditing and Assurance Service in Australia, McGraw-Hill Education (Australia) 

Sadegh, B., Reza, Z., & Farzard, F 2013, Examining the effect of auditing quality on nonfinancial information disclosure quality. Audit quality review Interdisciplinary Journal of Contemporary Research In Business, vol. 4, no. 12, pp. 802–810.


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