Audit Quality in ASEAN

Abstract:     
This study explores audit quality in ASEAN from an analysis of the legal environment faced by statutory auditors. First, it provides an overview of the national laws, regulations, professional codes and standards defining the legal environment. Second, it provides an economic analysis of the main differences among countries and relates those differences to the functioning of the audit markets, with a potential for uneven audit quality in the region.

Data were collected with questionnaires from national representatives of four Big Five firms, and accuracy of the information was reviewed by 15 governmental and professional bodies responsible for regulating the auditing profession in ASEAN.

Analysis of the data revealed a diverse legal environment among the ASEAN countries possibly creating a climate of differential audit quality. Many differences were observed in the competence requirements of auditors, the requirements regarding the conduct of statutory audits, and the reporting obligations. Further, audit quality in some countries is seriously compromised due to a lack of rules ensuring auditors' independence. Finally, some of the liability regimes in ASEAN do not provide an incentive for statutory auditors to provide quality audit services. Several recommendations are made to improve the legal environment by bringing the national laws and regulations in line with international standards of auditing which would result in a more uniform audit quality throughout ASEAN.

Keywords: ASEAN, Audit quality, International auditing standards, statutory auditors

JEL Classification: M40, M41, M49, J44, N45, O53

Accepted Paper Series