The willingness of auditors to supply the quality of the audit of the first part

The willingness of auditors to supply the quality of the audit of the first part

Supplying the quality of the audit of the first part, which we deal with in several parts.

The motivation of auditors to be independent as well as having professional competence makes auditors tend to provide quality audits (Watz and Zimmerman, 1981).

Also, auditors’ motivation to achieve fame and their concerns about legal claims cause the concept of independence to become more important for auditors (Dai, 1993).

The professional competence of auditors refers to the ability of auditors to provide high quality audits.

In the case of joint-stock companies, the legislator sets a minimum as the floor for providing audit quality.

But it is possible to influence the audit quality by using other laws such as requiring auditors to receive professional certificates from the public accountants community as a tool to increase the professional competence of auditors.

In the following, the motivation and qualification of auditors will be discussed separately for high quality audit.

1- The effect of auditors’ motivation on the supply of audit quality

From the point of view of motivation, three types of risk can be mentioned for auditors as follows:

Risk related to legal claims:

It is a risk that will bring financial penalties for auditors.

Reputational risk:

A risk that reduces the ability to attract and continue cooperation with business owners.

Regulatory risk:

The risk of legislative intervention, which will bring penalties for auditors.

At first glance, it may seem that reputational risk increases audit quality.

But in fact, there is little evidence to prove this claim.

The research conducted in this field specifically examines the factors of Enron’s failure.

In this research, the negative effects of Enron’s failure as one of the largest clients of Anderson Audit Institute on other clients of this company are examined.

A large number of researches indicate the negative reaction of Anderson’s auditors to Enron, this case does not end only in America.

In Germany, KPMG was also audited after failures.

She lost some of her customers (Weber et al., 2008).

Also, audit failures in Japan caused a decrease in PWC’s clients (Skinner and Srinivasan, 2012).

The mentioned studies show the influence of auditors’ reputation on audit quality.

In other words, auditors try to provide audit services at a high level of quality in order to gain or maintain their reputation.

Lawsuits will cause far greater damage to auditors.

Therefore, it can be expected that the risk related to legal claims creates a greater incentive to provide high quality services in the auditor.

Auditors are expected to adopt different strategies to deal with these claims.

For example, the strategy of reducing risk by increasing audit quality (Simonik, 1980),

The strategy of receiving more remuneration in exchange for bearing higher risk (Bell, Dugar and Selmon, 2008),

Avoiding risk by keeping low-risk business owners and cutting off cooperation with high-risk customers (Johnston-Bedard, 2004) and finally risk reduction strategy through lobbying to reduce legal liabilities (Geiger and Raghundan, 2001).