The quality of the second part of the audit
The quality of the second part of the audit
The quality of the second part of the audit
4. Audit industry and audit markets
Audit firms form an industry.
The structure of any industry can affect economic behavior in markets (such as product quality and service pricing).
Despite the potential importance of industry structure in the field of economic management of audit institutions, few studies have been conducted in this field.
Although the dominance of large firms is probably a logical consequence of economies of scale.
But the legislation has expressed concerns about the growth of market dominance by large audit institutions and its possible negative impact on audit quality (due to the lack of competition).
(Francis, 2011).
5. Institutions and mechanisms
The final arrangements refer to the country’s legal system that defines the auditors’ legal responsibilities.
Each country has its own unique institutions that regulate and supervise auditors.
For example, in the United States, institutions include state boards of accounting that certify auditors.
or the Association of Certified Public Accountants, which designs certification exams.
and compiles audit standards for companies not listed on the stock exchange.
Institutions also include the Financial Accounting Standards Development Board, which develops financial accounting standards.
The Securities and Exchange Commission establishes regulations for companies admitted to the stock exchange.
And the audit of these companies has also been required.
Also, the Securities and Exchange Commission appoints the authorized auditors of the stock exchange.
and has the power to punish auditors and audit institutions participating in misleading reporting of stock exchange member companies.
The auditors who audit the member companies of the stock exchange are also subject to the regulations of the Accounting Supervisory Board of Public Stock Exchanges.
which publishes auditing standards related to stock exchange member companies.
and inspects auditing institutions in the form of its quality control mission.
In addition, there are other important institutional mechanisms that provide monitoring of companies in addition to independent auditing.
Duties of board members and audit committees in line with the implementation of corporate governance principles are examples of these mechanisms.
These governance mechanisms can also affect the independent audit.
(Francis, 2011)
6. Economic consequences of audit results
One of the dimensions of the comprehensive assessment of audit quality is to examine the economic consequences of audit results on companies and external users.
Economic analysis of audit results is important because it shows the value and information content of audit reports and its economic consequences.
(Francis, 2011)
Measuring audit quality
There are several important and important decisions regarding the quality of the audit as follows:
Diez and Giroux (1992) considers quality control in institutions as a measure to measure the actual quality of audit.
From the point of view of Davidson and New (1993), the scale for measuring audit quality is the difference between the predicted profit and the reported profit, and this difference indicates higher audit quality.
Palm Rose (1994) has used the amount of lawsuits against auditors in relation to measuring the actual audit quality.
She believes that audit quality and the size of the audit firm have a positive correlation with each other.
Lam and Chang (1994), based on their research in Singapore state that since the forecasted profit is audited and verified separately, the difference between the forecasted profit and the reported profit is independent of audit quality. .
Krishnan and Schuer (2000), believe that the real scale of quality measurement is due to the fact that institutions comply with accounting principles.
Summary and conclusion
Audit quality has a variety of definitions.
In the professional literature, audit quality is defined in terms of compliance with relevant audit sensitivity standards.
In contrast, accounting researchers assign multiple dimensions to audit quality .
And these dimensions often lead to definitions that look different.
Each of these definitions includes different degrees of competence and independence of auditors in conducting audits (actual independence) as well as how users perceive their independence.
In general, quality audit features include importance, reliability, impartiality, audit scope, timeliness, clarity and efficiency.
Audit institutions should therefore implement policies, systems and procedures that reinforce the aforementioned quality factors and implement quality controls at all stages of the audit, including job adoption, work schedule, planning, implementation, evaluation of findings, conclusions, reporting and audit proposals.