Relationship between audit quality measures: peer-review evidence from individual auditors

Abstract

There is a recent call from academics to study audit quality at individual auditor level. This study analyses the relationship between different audit quality measures using Finnish data from individual auditors. Several measures (peer-review grade, compliance with audit standards, discretionary accruals and going concern opinions) are used to capture audit quality. Four hypotheses are developed to assume positive relationships between the audit quality measures. Furthermore, one hypothesis is drawn for the relationship between the measures and a set of auditor characteristics (audit quality input measures). These hypotheses are assessed by correlation and factor analyses using data from 172 Finnish individual auditors. Empirical findings contradict many of the hypotheses indicating strong positive relationship between the measures of peer-review grade and compliance with standards but only loose relationships between other classes of measures. They also indicate that auditor characteristics are only weakly associated with quality outcome measures.