Understanding Audit Quality: Insights from Audit Professionals and Investors

61 Pages Posted: 24 Nov 2013 Last revised: 4 Mar 2019

See all articles by Brant E. Christensen

Brant E. Christensen

University of Oklahoma

Steven M. Glover

Brigham Young University

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Marjorie K. Shelley

University of Nebraska at Lincoln - School of Accountancy

Date Written: October 2, 2014

Abstract

Projects seeking to define, measure, and evaluate audit quality are on the agendas of auditing standards setters as well as audit firms. The PCAOB currently provides information regarding audit quality through the release of inspection reports, and the Board intends to establish and report audit quality indicators. To provide additional perspective on audit quality, we obtain auditors’ and investors’ views, definitions, and indicators of audit quality. We find that investors’ definitions of audit quality focus more on inputs to the audit process than do auditors’, and that the two groups have differing views on the relation between PCAOB inspections and audit firm quality. We find a consensus that auditor characteristics may be the most important determinants of audit quality, and that restatements may be the most readily available signal of low audit quality. We relate responses to a generally accepted audit quality framework, provide support for archival audit research, and identify additional disclosures that participants suggest could signal audit quality. Taken together, we provide evidence regarding the construct of audit quality in the post-SOX environment, add substance to theoretical frameworks, evaluate many of the audit quality indicators proposed by the PCAOB, and suggest avenues for future research.

Keywords: Audit quality, audit quality indicators, PCAOB inspections, survey, restatements

Suggested Citation

Christensen, Brant E. and Glover, Steven M. and Omer, Thomas C. and Shelley, Marjorie, Understanding Audit Quality: Insights from Audit Professionals and Investors (October 2, 2014). Contemporary Accounting Research, Forthcoming; Mays Business School Research Paper No. 2358163. Available at SSRN: https://ssrn.com/abstract=2358163 or http://dx.doi.org/10.2139/ssrn.2358163

Brant E. Christensen (Contact Author)

University of Oklahoma ( email )

Norman, OK 73019-4004
United States

Steven M. Glover

Brigham Young University ( email )

Provo, UT 84602
United States
801-422-6080 (Phone)
801-422-0621 (Fax)

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Marjorie Shelley

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

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