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Measuring Audit Quality

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Title:Measuring Audit Quality
Authors:Zheng, Xin
Rajgopal, Shiva
Srinivasan, Suraj
Keywords:Audit Quality
Securities Class Action Lawsuits
show 2 moreAudit fees to total fees ratio
city specialist
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Date Issued:27 Aug 2018
Abstract:This study first provides detailed descriptive analyses on 45 specific audit deficiency allegations based on GAAS as detailed in 141 AAERs and 153 securities class action lawsuits over the violation years 1978-2016, and then uses these allegations to validate existing popular proxies of audit quality. Of all the audit quality proxies, we find that restatements consistently predict all the top six most cited audit violations. The ratio of audit fees to total fees and the presence of city specialist auditor predict five of the most cited violations. Overall, our results suggest that the predictive power of audit quality proxies depends on (i) the settings that researchers are interested in; and (ii) the specific audit violations hypothesized to matter in the investigated setting. For example, for future studies related to auditor independence, we recommend the use of restatements and audit fees to total fees ratio as proxies of audit quality.
Appears in Collections: 02 Auditing

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