Abstract
The purpose of this paper is to review the research literature dealing with output indicators that indicate the level of audit quality: Auditor's report, bankruptcy, client satisfaction, auditor litigation and expectation-gap. This paper reviews a total of 89 papers authored post-2012, which relates to output indicators of audit quality, using a Systematic Literature Review. For each study, we demonstrated the methodology used (Archival/ Experimental), the sample chosen and the main results. Based on our findings, studies on the audit report state that it should contain more information and detail. For bankruptcy, researchers find that going concern opinion is an essential element in predicting bankruptcy, and that the auditor becomes more conservative after a bankruptcy. Through experimental studies on client-satisfaction studies, researchers have ruled on the elements that can satisfy clients on the audit work. The research on auditor litigation state that auditors being sued provide higher audit quality because they have more wealth at risk in case of litigation. The common cause of audit expectation-gap is the misperception of the auditors' responsibility to detect and prevent fraud. We contribute to the literature in the following aspects. First, we propose an audit quality framework that includes all the factors indicating the level of the external audit's quality (Auditor-related indicators; Audit-process indicators; Output indicators). Second, we present a review on the output indicators of audit quality (auditor's report, bankruptcy, client satisfaction, auditor litigation and expectation-gap). Thirdly, we draw on the results of previous literature and provide suggestions for future research.
Highlights
By virtue of its functions, audit is qualified as a governance mechanism; its role lies in improving the financial communication of organizations, ensuring good external governance and improving the confidence of third parties in the organization
We can conclude that “Audit quality is an audit mission performed by a competent, independent, and experienced professional, in accordance with generally accepted auditing standards, to provide financial statements’ users with reasonable assurance, in the auditor's report, that the financial statements and related information are presented in accordance with auditing standards and are not materially misstated.”
The choice of these five indicators is based on a set of research [1,5,7,9], that has classified the indicators of audit quality in great majority around 3 main parts: Auditor-related indicators; Audit-process indicators and Output indicators
Summary
By virtue of its functions, audit is qualified as a governance mechanism; its role lies in improving the financial communication of organizations, ensuring good external governance and improving the confidence of third parties in the organization. Its power and importance in decision-making arouse the interest of right holders (citizens, employees, shareholders, etc.) who need to be assured of its quality Measuring this quality is not an easy task, because the audit engagement process varies from one engagement to another depending on its context, especially since the content and focus of the audit report are so standardized that they offer little opportunity for differentiation. In this sense, it is only in the event of a bankruptcy or financial scandal (Xerox, 2000; Enron, 2001 and WorldCom, 2002) that we can focus on the failure of the audit mission. Several initiatives of measurement of the audit quality have been conducted by regulatory bodies of the audit profession [1, 2, 3] and researchers [4, 5, 6], whose objective is to determine the most effective way to assess and determine audit quality
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