Public Oversight and Audit Quality: Evidence from Public Oversight of Audit Firms in the Netherlands

Posted: 25 Aug 2011 Last revised: 29 Aug 2011

See all articles by Martijn van Opijnen

Martijn van Opijnen

Maastricht Accounting and Auditing Research and Education Center (MARC)

Katrien Van de Poel

University of Antwerp

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC); Maastricht University

Date Written: August 25, 2011

Abstract

Using public and proprietary data of the Dutch public oversight body, we study the trade-off suggested by DeFond (2010) of expertise for independence associated with the shift from a peer review system to independent public oversight of audit firms. Specifically, we investigate the association between the audit firms’ inspection and peer review outcomes, and the audit clients’ accruals quality. Our results show that companies audited by an audit firm with a positive inspection outcome have lower abnormal accruals than companies audited by an audit firm with a negative inspection outcome. We find no significant association between the peer review outcomes for audit firms with public interest entities and the audit clients’ abnormal accruals. Furthermore, we find that the types of weaknesses identified by the public oversight body that are most able to discriminate audit quality are related to the design of the audit firm’s quality control system and independence. Overall, our study contributes to the emerging literature on the effectiveness of oversight of audit firms, and is one of the first that relates to a non-US setting.

Suggested Citation

van Opijnen, Martijn and Van de Poel, Katrien and Vanstraelen, Ann, Public Oversight and Audit Quality: Evidence from Public Oversight of Audit Firms in the Netherlands (August 25, 2011). Available at SSRN: https://ssrn.com/abstract=1916558

Martijn Van Opijnen (Contact Author)

Maastricht Accounting and Auditing Research and Education Center (MARC) ( email )

Katrien Van de Poel

University of Antwerp ( email )

Prinsstraat 13
Antwerp, Antwerp 2000
Belgium

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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