Measuring audit quality

• 成果类型: Article
• 署名作者: Rajgopal, Shivaram; Srinivasan, Suraj; Zheng, Xin
• 署名单位: Columbia University; Harvard University; University of British Columbia
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-020-09570-9
• 发表日期: 2021
• 页码: 559-619
• 关键词: NONAUDIT SERVICES; industry expertise; LITIGATION RISK; big 4; earnings; fees; INDEPENDENCE; securities; proxies; TENURE

摘要

We document 45 specific allegations related to audit deficiencies based on GAAS, as detailed in 141 AAERs and 153 securities class action lawsuits over the violation years 1978-2016. Next, we use these allegations to validate popular proxies of audit quality. Of all the audit quality proxies, we find that restatements consistently predict all of the top six most cited audit deficiencies. The ratio of audit fees to total fees and the presence of a city specialist auditor predict five of the most cited deficiencies. 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 deficiencies hypothesized to matter in the investigated setting. For instance, future studies related to auditor independence might consider using restatements and the ratio of audit fees to total fees as proxies of audit quality.