Econometric Forecasting of Money Mobilization Through Public Issues in Indian Primary Capital Market using Box-Jenkins ARIMA Model

Corporate finance is raised from the primary capital market through public offers, rights issues and private placement, etc. Public offer is the largest sources of funds from the primary capital market to the company. Basically, an invitation is made by a company to the public to subscribe to its securities offered through prospectus is called as public offers, which can be adopted either under fixed price, book- building method or pure auction method. Public issues are of two types, namely Initial Public Offer (IPO) and Further Public Offer (FPO).  The study analyses the trend and forecasting of money mobilization through public issues in Indian primary capital market during 2000-2001 to 2020-2021 based on data during 2000-2001 to 2018-2019 using ARIMA Modeling. The study finds that the ARMA (6, 5) model has become the best model to depict the behaviour of the first differences of the capital raised through public issues over the study period. The study also explores that the forecast values of capital raised through public issues in India for 2018-2019, 2019-2020 and 2020-2021, may be 95100.58, 119465.6, and 107820.3 (crore in rupees), respectively. Keywords: Indian Primary Capital Market, Resource Mobilization, Public Issues, ARIMA Model

Audit Activities and Quality Control for Statutory Financial Audit: Empirical Evidences

The study examines respondents’ opinions on select issues concerning audit procedures and their relationship with quality control for statutory financial audit. Four integral aspects of audit activities including audit engagement, audit planning, audit sampling and audit documentation have been considered in order to select 19 variables based on their governing ‘Standards on Auditing’ (SAs) and consultation with practising professional accountants. These variables may have a relation with dependent variable like ‘Quality Control for Statutory Financial Audit’. Keeping in view of the matter, opinions of 227 CAs and 146 Students on these 20 variables are collected and empirically studied using Mean Score, Mann-Whitney Test and Pearson’s Correlation Coefficient and t test. Findings suggest that SAs governing the aforesaid issues are sufficient, while their proper implementation is needed. Besides competence and independence of engagement partners, involvement of all the members of an accounting firm in the audit process would bring effective results. Keywords: Audit Engagement, Audit Planning, Audit Sampling, Audit Documentation, Quality Control, Mean Score, Mann-Whitney, Pearson’s Correlation Coefficient, t test

Capital Formation Through Public & Rights Issues in Indian Primary Capital Market: An Econometric Forecasting using Box-Jenkins ARIMA Model

The primary capital market is the appropriate route for the capital formation in corporate sectors through public offers, rights issues and private placement, etc. The largest sources of funds from the primary capital market to the corporate sectors are mobilized through public and rights issues. Basically, an invitation is made by a company to the public to subscribe to its securities offered through prospectus is called as public offers, which can be adopted either under fixed price, book- building method or pure auction method. Public issues are of two types, namely Initial Public Offer (IPO) and Further Public Offer (FPO). On the other hand, the existing equity shareholders of the company are given opportunity to invest their money in the form of rights issues. The study analyses the forecasting of money mobilization through public and rights issues in Indian primary capital market during 2000-2001 to 2020-2021 based on data during 2000-2001 to 2018-2019 using ARIMA Modeling. The study finds that the MA (1) model has become the best model to depict the behaviour of the first differences of the capital raised through public and rights issues over the study period. The study also explores that the forecast values of capital raised through public and rights issues in India for 2018-2019, 2019-2020 and 2020-2021, may be 80,796.10, 84,446.55 and and 88,097.01  (crore in rupees), respectively. Keywords: Capital Formation, Indian Primary Capital Market, Resource Mobilization, Public and Rights Issues, ARIMA Model

Underpricing of Select NSE-listed IPOs in India with Respect to Differences in Issue Size: An Empirical Analysis

Initial Public Offerings (IPOs) play an essential role of capital formation in the primary capital market. The interested investors subscribe to the IPOs at their issue price. There are many factors influencing the price performance of IPOs. Considering this, the current study analyses the first day price performance of IPOs on the basis of the issue size of the IPOs. The study examines the various measures of first day returns on the basis of the different groups formed considering differences in issue size for the sample IPOs companies. Such measures of average returns are tested for statistical significance with the help of one-sample t-test. Keywords: Capital formation, Initial Public Offerings (IPOs), Initial Returns, MAAR, Underpricing, Issue size DOI: 10.7176/EJBM/15-1-02 Publication date: January 31st 202

Select Factors Governing Quality of Statutory Financial Audit: A Comparative Study

The study identifies three pertinent areas in an audit procedure where statutory auditors depend upon other internal or external parties for developing audit plan or collecting audit evidences. They are, ‘using the work of internal auditors’, ‘external confirmations’ and ‘using the work of an auditor’s expert’. Auditing standards governing these three distinct issues in three different countries, the United States of America (USA), the United Kingdom (UK) and India have been considered and a comparative analysis among their requirements has been made. The study observes that comparable standards governing ‘using the work of internal auditors’, ‘external confirmations’ and ‘using the work of an auditor’s expert are almost identical. However, the standards in UK and India with respect to these issues are more comprehensive than that of USA. Keywords: Internal Auditor, External Confirmations, Auditor’s Expert, USA, UK, India, Comparative Analysi

Overall Objectives of an Independent Auditor: A Cross Country Analysis

Statutory auditors are required to attest material accuracy, appropriateness and fairness about financial statements of corporate enterprise. Quality of their work depends upon their competence and independence towards their profession. Existing auditing standards guides an auditor through the audit procedure. Out of them, there is one standard that set the overall objectives of an independent auditor. The current study makes a comparative analysis of overall objectives of an independent auditor as per their governing standards in USA, UK and India. It is observed that the requirements relating to overall objectives are almost similar in UK and India. However, the standard governing overall objective is more comprehensive in USA. Keywords: Statutory Audit, USA, UK, India, Overall Objectives

Internal and External Factors Governing Quality of Statutory Financial Audit: A Perceptual Study

The study reviews the existing Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India governing ‘using the work of internal auditors’, ‘external confirmations’ and ‘using the work of an auditors’ expert’ and identifies 12 critical issues that may have significant impact on quality of statutory financial audit. Opinions of 227 Chartered Accountants (CAs) and 146 Students pursuing Chartered Accountancy course have been collected through a field survey using a close ended structure questionnaire. Respondents’ opinions are analysed using proportion of respondents with different degrees of agreement and their mean scores for different issues contained in the questionnaire. The study finds that auditors should necessarily check the internal control system present in the client company before starting the actual work. A strong Audit Committee could facilitate that purpose. Scientific design of confirmation requests is also necessary. Finally, it is inferred that existing SAs governing the aforesaid issues are adequate. However, its proper enforcement is needed to enhance the quality of statutory financial audit. Keywords: Statutory Audit, Internal Audit, External Confirmations, Auditors’ Expert, Percentage Analysis, Mean Score

A Conceptual Review on Select Standards on Auditing (SAs) in the Backdrop of Audit Activities in India

The study identifies a few audit activities which may have significant influence on overall audit quality. They are, ‘accepting the terms of engagement’, ‘formulating an audit plan’, ‘collecting audit evidences’, ‘adopting audit samples’, ‘documenting audit working papers’ and ‘preparing auditors’ report’. Statutory auditors’ responsibilities with regard to each of these issues are prescribed in separate Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (ICAI). They are SA-210, SA-300, SA-500, SA-530, SA-230, and SA-700 respectively. Important requirements of these SAs keeping in view overall audit quality are discussed in this paper. Keywords: Audit Engagement, Audit Planning, Audit Evidences, Audit Sampling, Audit Documentation, Auditors’ Report, ICAI, SAs

Exploring a Relationship Between Quality Control Procedure and Select Input Factors for Statutory Financial Audit

The study identifies 12 critical issues based on Standards on Auditing issued by the Institute of Chartered Accountants of India relating to using the work of internal auditors, auditors’ expert and external confirmations and that may influence quality control procedure for statutory financial audit. Opinions of 227 CAs and 146 Students pursuing Chartered Accountancy course on these variables have been gathered and empirically analysed with the help of Chi-Square test of homogeneity, Mann-Whitney test, Pearson’s Correlation Coefficient (r) and t test and suitable conclusions are drawn. Keywords: Internal Auditor, External Confirmations, Auditors’ Expert, Chi-Square, Mann-Whitney, Pearson’s Correlation Coefficient, t test

Framework of Audit Quality for Statutory Financial Audit: A Conceptual Review

Compliance with applicable legal and regulatory requirement and issuing reports which are appropriate in circumstances is the basic prerequisite of quality audit. According to framework of audit quality proposed by International Auditing and Assurance Standards Board (IAASB) under International Federation of Accountants (IFAC), quality of audit depends upon certain underlying factors, communication among the stakeholders of financial reporting supply chain and certain contextual issues. In this current study, an attempt has been made to conceptually discuss the framework of audit quality as proposed by IAASB and draw conclusion on its applicability in ensuring quality of audit. Keywords: Statutory Audit, Quality Control, Audit Quality