Culture and Audit Quality: Evidence from PCAOB Inspection Reports

• In Event: Auditing Contexts and Issues

Abstract

ABSTRACT: We investigate the relationship between Hofstede’s cultural values and audit quality, as measured by the number of audit deficiencies found in non-US inspection reports from 2005 to 2017. We find evidence supporting a conclusion that audit deficiencies are lower in countries with lower Uncertainty Avoidance scores, higher Individualism scores, and lower Power Distance scores. We conclude that countries with cultures more accepting of ambiguity and uncertainty, having more flexible business practices, and are more tolerant of individual contributions are associated with higher quality audits, as measured by reduced audit deficiencies.

Authors

• Angel Arturo Pacheco Paredes, Texas A&M International University

• Robin L Knowles, Texas A&M International University