Management Perceptions of Audit Quality

• In Event: Emerging Issues in Audit Quality

Abstract

Audit quality is an important topic for auditors, regulators, and academics. We survey members of management to better understand their perspective on audit quality and how they view auditors’ ability to demonstrate it on their engagements. Management’s views on audit quality are important because of the key role they assume in coordinating audit engagements. They are also perceived as a critical voice in the hiring and firing of auditors; thus, auditors have incentives to understand how management evaluates their work. We find that management defines audit quality primarily through the characteristics of the auditor, the audit processes used on an engagement, and the outcomes of the audit. When asked how auditors demonstrate audit quality, however, management focuses predominately on auditor characteristics and processes, while largely ignoring the outcomes of the audit. In addition to surveying management about audit quality, we also obtain feedback on management’s perceptions of the relevance of the CAQ’s Audit Quality Indicators. Management perceives the indicators related to auditor characteristics and processes as most relevant to determining audit quality. Outcome measures, such as PCAOB inspection reports, are viewed as least informative.

Authors

• Erik S. Boyle, University of Cincinnati

• Martha M Eining, University of Utah