Auditors’ Perceptions on Audit Quality Indicators: Insight into Potential Root Causes of Audit Deficiencies

• In Event: Emerging and Innovative Research Session II

Abstract

The Public Company Accounting Oversight Board (PCAOB or the Board) has been conducting risk-based inspections of public company auditors since 2004 and providing feedback regarding areas of concern. While the Board acknowledges overall improvement in the level of audit performance deficiencies over the past 10 years, there is concern due to the reoccurrence of certain deficiencies relating to, among other things, lack of technical competence or due professional care, ineffective or insufficient supervision, or ineffective engagement quality reviews (PCAOB 2012a, 2012b, 2012c, 2013). To that cause, the PCAOB urges practitioners and academia to conduct research to help identify root causes and means for remediation of audit deficiencies. Accordingly, this study seeks to gain insight into potential root causes of audit deficiencies by soliciting the perceptions and experiences of public company auditors on various indicators of audit quality.
We propose to administer an anonymous online survey to auditors of all ranks across various industries and audit firm sizes. We shall acquire participants (1) through firm contacts, (2) by purchasing mailing lists from various state CPA societies, or (3) by engaging the services of a professional marketing firm. By providing anonymity and an academic research setting, auditors should be more forthcoming in their responses without fear of jeopardizing their jobs or damaging their careers.
This project will be beneficial to the PCAOB by (1) offering valuable insights into possible root causes of audit deficiencies, and (2) providing input as the Board considers audit quality indicators and other facets of audit quality for development of an Audit Quality Framework in the United States. The study could also be useful to other regulators, such as the SEC, FASB, and AICPA, in their standard setting agenda to the extent that root causes may relate to technical expertise or specific financial statement topics or areas, as well as practioners, other stakeholders, and academia. Practioners may use the information from this study to improve audit quality by addressing the concerns expressed by lower level auditors and remediating possible root causes of audit deficiencies. An increase in audit quality will lead to fewer financial statement misstatements and internal control weaknesses, which is favorable for all capital market stakeholders. Lastly, academia will gain greater insight into the audit process from auditors directly engaged in public company audits, which informs research and provides avenues for future research.

Authors

• Veena Looknanan Brown, University of Wisconsin–Milwaukee

• Jodi Lynn Gissel McDowell, Marquette University

• Jennifer R Joe, Georgia State University