Keywords

audit quality, PCAOB inspections

Abstract

Projects seeking to define, measure, and evaluate audit quality are on the agendas of auditing standards setters as well as audit firms. The Public Company Accounting Oversight Board (PCAOB) currently provides information regarding audit quality through the release of inspection reports, and the Board intends to establish and report audit quality indicators. To provide additional perspective on audit quality, we obtain auditors’ and investors’ views, definitions, and indicators of audit quality. We find that investors’ definitions of audit quality focus more on inputs to the audit process than do auditors’, and that investors view the number of PCAOB deficiencies as an indicator of overall firm quality. We find a consensus that auditor characteristics may be the most important determinants of audit quality, and that restatements may be the most readily available signal of low audit quality. We relate responses to a general audit quality framework, provide support for archival audit research, and identify additional disclosures that participants suggest could signal audit quality. Taken together, we provide evidence regarding the construct of audit quality in the post-SOX environment, evaluate many of the audit quality indicators proposed by the PCAOB, and suggest avenues for future research.

Original Publication Citation

"Understanding Audit Quality: Insights from Audit Professionals and Investors", Edition 4, Volume 33, Pages 1648-1684, Contemporary Accounting Research, 2016

Document Type

Peer-Reviewed Article

Publication Date

2016

Publisher

Contemporary Accounting Research

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Associate Professor

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