For Better or Worse: A Study of Auditors’ Practices under Auditing Standard No. 7

• In Event: Auditor Response to Audit Regulation

Abstract

Auditing Standard No. 7, Engagement Quality Review for an Audit (AS No. 7), provided revised guidance for the Engagement Quality Review (EQR) process. To better understand what, if any, changes have occurred in the nature, extent, and timing of the EQR process, and the potential effect of such changes on audit quality, we gathered data from practicing audit partners. Results indicate that AS No. 7 changed the nature of EQRs by impacting the role and approach of the EQ Reviewer. It impacted the extent of the EQR by expanding procedures and altering the level of communications between the EQ Reviewer and some engagement team members; but it had little impact on the timing of EQRs. Overall, although auditors perceive the standard as enhancing audit quality, they also perceive it has decreased audit efficiency. Further, in terms of communications and timing, auditors perceive process changes brought about by AS No. 7 are in some cases still less than ideal. Our study identifies opportunities for improving the EQR process and suggests areas for future research.

Authors

• Denise Dickins, East Carolina University

• Rebecca Fay, East Carolina University

• Brian E Daugherty, University of Wisconsin–Milwaukee