Audit Quality Overview

Principles

Definition

Audit quality is an academic concept and research field concerned with the characteristics of an audit engagement that enhance the reliability and informational value of financial statements, thereby increasing user confidence and supporting informed decision-making. It investigates factors related to auditor competence, independence, and the rigorous application of auditing standards, which collectively influence the probability of detecting and reporting material misstatements.

Ontological type

Measurement Proxies

Determinants

Regulation and Standards

Key developments

Key Figures

Reputational Signaling era

Jere R. Francis [1], affiliated with the University of Iowa [2] and the University of Missouri [3], contributed to audit research during the reputational signaling period. His key contribution in this era is the paper 'Auditor brand name reputations and industry specializations' [4], which argues that brand-name reputations and industry specialization function as signals shaping investor trust and capital-market outcomes. This contribution highlighted how reputation serves as a central mechanism linking audits to market outcomes in this period. Overall, Francis's work established a framework for interpreting audit quality as reputational signaling and helped guide subsequent research and practice.

Governance and Independence era

Mark L. DeFond [1] is a prominent scholar in governance and independence during this era, with affiliations linked to the University of Hong Kong [3] and the Hong Kong University of Science and Technology [4]. Mark L. DeFond [1] contributed to this era with The Effect of Audit Quality on Earnings Management* [7], demonstrating that higher audit quality reduces earnings management and informing governance debates on rotation and independence rules. K.R. Subramanyam [2] is a leading figure in this era with ties to the University of Southern California [5] and the Southern California University for Professional Studies [6]. K.R. Subramanyam [2] contributed to the understanding of audit quality and earnings management through The Effect of Audit Quality on Earnings Management* [7], underscoring its policy relevance for governance design across jurisdictions.

Stakeholder Communication era

Brant E. Christensen [1], with affiliations to the University of Missouri [3] and Syracuse University [4] in this era, contributes to the study of audit quality. His key contribution, through the 2015 paper Understanding Audit Quality: Insights from Audit Professionals and Investors [5], is to synthesize practitioner and investor perspectives to illuminate what constitutes audit quality and why it matters for stakeholder communication. Steven M. Glover [2], also associated with the University of Missouri [3] and Syracuse University [4], contributes to the same work by integrating practitioner and investor viewpoints to advance understanding of audit quality in governance contexts. Collectively, Christensen [1] and Glover [2] advance a stakeholder-centric view of audit quality in this era, illustrating how transparent auditor communication shapes investor and regulator responses as demonstrated in the 2015 paper [5].