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    Understanding Audit Quality: Insights from Audit...
    research summary posted February 16, 2017 by Jennifer M Mueller-Phillips, tagged 11.0 Audit Quality and Quality Control, 11.07 Attempts to Measure Audit Quality, 11.08 Proxies for Audit Quality 
    Understanding Audit Quality: Insights from Audit Professionals and Investors
    Practical Implications:

    This study provides evidence that should help inform the public discussion of audit quality in the post-Sarbanes-Oxley era and adds empirical substance to theoretical frameworks of audit quality.  


    Christensen, B. E., S. M. Glover, T. C. Omer, and M. K. Shelley. 2016. Understanding Audit Quality: Insights from Audit Professionals and Investors. Contemporary Accounting Research 33 (4): 1648 – 1684. 

    Purpose of the Study:

    Much debate exists surrounding the definition, composition, and measurement of audit quality. This debate continues despite the importance of audit quality and the large body of research investigating the topic. This paper contributes to this debate by obtaining perceptions and measures of audit quality from audit professionals and investors, two groups heavily interested in the audit and financial reporting process.  Furthermore, this study provides evidence that contributes to understanding and defining audit quality, providing empirical evidence regarding many of the audit quality indicators proposed by the PCAOB, adding empirical substance to existing theoretical frameworks of audit quality and highlighting differences and consistencies between auditor and investor expectations about the audit process. 

    Design/Method/ Approach:

    The authors conducted a survey of audit professionals and investors to obtain their insights on audit quality.

    • The authors find that audit professionals define audit quality primarily in terms of compliance with professional auditing standards, while investors rely more on the individual characteristics of the engagement team performing the audit.
    • The authors find almost unanimous agreement that individual auditor characteristics influence audit quality.
    • The authors find evidence that input from parties outside the core engagement team such as the national office and engagement review partners is an important attribute of audit quality.
    • The authors find evidence that client-specific factors such as restatements, SEC enforcement actions, and the frequency of audit committee meetings are significant indicators of audit quality; however, they also find that investors’ perceptions of audit quality do not fully incorporate the importance of the audit committee in the audit process to the same extent as auditors. 
    Audit Quality & Quality Control
    Attempts to Measure Audit Quality, Proxies for Audit Quality