Over the past 20 years, research has been carried out to interpret audit quality and still no agreement on the method of measurement for audit quality. This is because audit quality depends on individual understandings, and those conceptions rely on whose perspectives are taken into consideration. The International Auditing and Assurance Standards Board’s (IAASB) lately established Framework for Audit Quality (the Framework) in the purpose to systemize the present thoughts and the main aspects that emphasize audit quality. It categorizes these into inputs, outputs, interactions and contextual aspects (refer Appendices, Fig. 1 and Fig. 2).
In general, studies are concentrated on the qualities of the auditor and the audit team as crucial elements of the input. The investigation has discovered that personal qualities such as professional skepticism, expertise knowledge and the specialize skill of the auditor are critical aspects contributing to the quality of auditors’ judgement and audit quality.
The audit process as part of the input under the Framework has been studied mostly by evaluating auditors’ judgement when assessing risks, audit production and assessment of audit evidence.
Perceptions of audit quality differ between stakeholders relying on their degree of immediate participation in audit and on the channels through which they judge audit quality (refer Appendices, Fig. 3 and Fig. 4).
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2. The History and Nature of Auditor Quality
Auditing has emerged through a few phases. In the mid of 18th century to early 19th century, the audit exercise was regarded as “traditional fair and justness role of auditing”. Though, the auditors have been performing an “enhancing role” for over 30 years.
Nowadays, auditors are required not merely to improve the reliability of the financial report, but to render value added service as well. In spite of that, following broad reform in many different countries as a consequence of the fall down of large organizations, it is foreseen that the duty of auditors will merge or intersect.
Auditing standards expect auditors to plan and carry out audits to attain reasonable assurance about whether or not the financial reports are without material misstatements and to conduct an evaluation about the accuracy and fairness on the financial reports.
The level to which financial statement users can rely on an audit opinion depends on the quality of the audit performed. Regardless of the significance of audit quality to the steadiness of the capital markets, and the large organization of research investigating the topic, regulators, investors and researchers continue to debate the definition, composition and measurement of audit quality (Francis 2011; Knechel et al. 2013).
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3. Current Objectives
Initially, the primary audit objectives were to reveal errors and fraud, secondly the fairness for ledger book entries was examined. Beginning from the 20th century, the main objective of audit was the verification of the trustworthiness of the financial reports.
Due to the rapid changes caused by complex economic activity and larger globalization of economic connections. More qualified auditors are demanded in the preparation to disclose and sufficiently measure the procedure and system in the organizations.
On another point of view, the auditors are pressured to justify their work, due to the unwillingness to pay out large sums of money for auditors’ services and rising competition between audit firms.
The circumstances are even more complex because audit practice, as correlated to the economic activities, discovers it toughness to promptly respond to transitions in economic cycle. Occasionally, it occurs that the society’s demands exceed auditing feasibilities and then disappointment happens, the trustworthy on auditing and auditors declines. Such circumstances results in the failure of...
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