Abstract
Over the years, there has been much debate regarding audit quality. The industry has struggled with how to define audit quality, as well as, how to identify the proper framework and indicators for assessing audit quality. Audit quality gained even more attention after corporate scandals, such as Enron (2001), WorldCom (2002), Tyco (2002), HealthSouth (2003), American Insurance Group (2005), Bernie Madoff (2008) and Lehman Brothers (2011). These scandals shattered the publics’ opinion of the accounting and auditing profession and caused investors to question the quality of the audits performed. To date, there is still “little agreement on how to define audit quality, let alone how to measure it” (Dickins et al. 2014, 1). This paper reviews the most recent academic articles published in the top journal during 1981 through 2017. Key words: audit quality indicators; audit quality; assurance; AQI
Highlights
Over the years, there has been much debate regarding audit quality
Under the Sarbanes-Oxley Act of 2002, the responsibilities of the Public Company Accounting Oversight Board (PCAOB) “are all directed at improving audit quality and thereby benefiting investors” (PCAOB 2015a, 2)
The PCAOB defines audit quality “as meeting investors’ needs for independent and reliable audits and robust audit committee communications on: (1) financial statements, including related disclosures; (2) assurance about internal control; and (3) going concern warnings” (PCAOB 2013, 3-4). While these definitions provide some insight into audit quality, the PCAOB believes the audit quality indicators (AQI) project will refine the definition of audit quality and provide a framework that allows audit quality to be more measured
Summary
There has been much debate regarding audit quality. The industry has struggled with how to define audit quality, as well as, how to identify the proper framework and indicators for assessing audit quality. Under the Sarbanes-Oxley Act of 2002, the responsibilities of the Public Company Accounting Oversight Board (PCAOB) “are all directed at improving audit quality and thereby benefiting investors” (PCAOB 2015a, 2). The PCAOB defines audit quality “as meeting investors’ needs for independent and reliable audits and robust audit committee communications on: (1) financial statements, including related disclosures; (2) assurance about internal control; and (3) going concern warnings” (PCAOB 2013, 3-4). While these definitions provide some insight into audit quality, the PCAOB believes the AQI project will refine the definition of audit quality and provide a framework that allows audit quality to be more measured
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