Abstract
Independent auditor’s opinion enhances the confidence of investors in the reporting system and leads to an increased in capital markets efficiency. Thus, the effectiveness and quality of opinion developed by the auditor about the financial statements is significantly important, because financial statements should be reliable, useful and relevant for investors and creditors. A s ignificant issue frequently raised in the accounting literature is whether judgments of auditors from large firms vary substantially from those of auditors employed by other firms. Then past researchers attempted to find the relationship between the size of company and auditor’s opinion and its quality. Review on the literature revealed that the size of firm can not affect auditor’s opinion but this survey found that some factors such as experience, education, skills and employee competence may have influence on quality of auditors and their opinion. This paper has categorized these views under special category of capital known as human capital. Thus, the study anticipates improvement in the relationship between audit firm’s size and independent auditor’s opinion by introducing human capital as a mediator variable.
Highlights
Small firms and regulators have argued that the quality of audit should be judged on the basis of the size of large public accounting firms as dictated in the disclosure of audit standard on independence of audit quality from auditor firm size (DeAngelo, 1981). DeAngelo (1981) rejected this allegation of small firms and revealed that big audit firms have more independence and higher quality in their audit work
Review on the literature revealed that the size of firm can not affect auditor’s opinion but this survey found that some factors such as experience, education, skills and employee competence may have influence on quality of auditors and their opinion
Since there are a few studies on size and independent auditor’s opinion, the study has a new suggestion for improving the relationship between audit firm size and independent auditor’s opinion
Summary
Small firms and regulators have argued that the quality of audit should be judged on the basis of the size of large public accounting firms as dictated in the disclosure of audit standard on independence of audit quality from auditor firm size (DeAngelo, 1981). DeAngelo (1981) rejected this allegation of small firms and revealed that big audit firms have more independence and higher quality in their audit work. Big audit firms will have the potential to lose their clients if they become notorious, have lower audit quality and show a lack of independence in their judgment. These issues lead to high motivation for improving audit quality. The Derieux Committee Report stresses the 'concern that smaller firms may be replaced because they are less well known, even though the smaller firms may well be providing as high or higher quality services In this condition, users cannot rely on accounting information and auditing reports (DeAngelo, 1981). DeAngelo noted that large audit firms are more independent in terms of audit revenue, the qulified opinion is more probable
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
