Estimation and Interpretation of Individual Auditor's Effects on Audit Quality Measures: Evidence from China
47 Pages Posted: 5 Jan 2017
Date Written: December 2016
This study examines the validity of conclusions on individual auditor quality obtained using four audit measures with the archival data from China. We argue that for an audit quality measure to effectively identify an auditor’s quality, two conditions must be satisfied: The measure is directly linked to the quality of information audited by the auditor and the measured auditor effect is indeed caused by the auditor. We posit that the conclusion on an auditor’s quality based on an audit quality measure may not be reliable if these two conditions are not satisfied. We then provide empirical evidence that the audit quality estimation models in the extant literature do not provide coherent identifications of individual auditor’s quality. Our results imply that some or all of these models may not be well specified to measure auditor quality, suggesting improvements on these models are required. The empirical results in this paper also suggest that researchers need to exercise caution in interpreting the estimation results of the auditor quality from these existing models in the literature.
Keywords: Audit Quality; Individual Auditor Quality; Quality Measure
JEL Classification: M42
Suggested Citation: Suggested Citation