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Emerald Group Publishing Limited
Article Type: Guest editorial From: Managerial Auditing Journal, Volume 29, Issue 9
The focus of this themed issue of Managerial Auditing Journal is devoted to publishing high-quality research papers that advance our understanding of audit quality. Audit quality is one of the most commonly studied and debated issues in the audit and assurance profession and is also of considerable interest in the regulatory context. Despite this debate, there is a lack of consensus as to the nature of audit quality, notwithstanding an increase in regulation and compliance. The aim of this themed issue is to enhance our understanding of audit quality, by publishing studies from a broad perspective using a range of established and emerging methodologies that complement existing experimental and archival studies. In particular, papers were sought that address issues in respect of audit quality such as, but not limited to, the validity and reliability of existing proxies of audit quality, the impact of audit firm and audit team characteristics on audit quality, auditor – client interactions, audit quality in the public sector, the market for quality differentiated audits, auditor choice and audit quality and the precursors of audit quality. Following the conclusion of the call for papers deadline and the submission process, each submitted paper was subjected to a blind reviewed by at least two referees. The submission and review process resulted in four contributions being suitable for publication. Each of the papers in this themed issue looks at audit quality from different perspectives and different research orientations.
In the first paper of this issue, Alan Kilgore, Graeme Harrison and Renee Radich take a behavioural approach to investigating the relative importance of audit-team and audit-firm attributes in perceptions of audit quality by two groups of users of audit services, namely, audit committee chairs/members and financial analysts/fund managers. A unique innovation of the study is the use of adaptive conjoint analysis in both gathering and analysing data. The findings reveal that the two groups perceive audit-team attributes as relatively more important than audit-firm attributes. The study makes a contribution by extending the scope of prior studies in examining the relative importance of audit-team and audit-firm attributes in perceptions of audit quality, and providing direct evidence on the relative importance of attributes in perceptions of audit quality for different users of audit services. The findings have implications for regulators and the accounting profession concerned with improving confidence in corporate reporting and for audit firms in monitoring and promoting the quality of their audit services.
The second paper by Hannu Ojala, Mervi Niskanen and Jill Collis consider the nature of audit quality in small firms and focus on the economic consequences of audit outcomes in these firms in Finland. Specifically, they investigate the usefulness of the audited financial reports in improving internal decision-making in small private companies and the specific benefits associated with the audit. Unlike prior studies that use aggregate measures of audit quality, they operationalise audit quality as the components of audit benefits to owner – managers of small private companies in Finland. Contrary to studies of listed companies, they find that that use of a Big 4 auditor is not a sufficient surrogate for audit quality in small companies. Their results provide consistent evidence of a positive relationship between the owner – manager’s perception of the competence and reliability of the external accountant and the perceived benefits of audit.
In the third paper, David N. Herda, Michael J. Petersen and Richard Fontaine address the question of whether client participation in an external audit affects their satisfaction with the audit service. In particular, they are concerned with whether self-serving bias affects the level of audit client satisfaction with their audit firm. They use a 2 × 2 between-subjects experimental design, where they manipulate the level of client satisfaction in the audit and the extent of value added services the client received. Using a sample of financial managers as a proxy for audit clients they find that, rather than a self-serving bias existing among clients, clients appear to be more satisfied with their auditor when they participate more in the service exchange. An important implication of this finding for audit firms is that they may consider encouraging clients to participate more in the audit process by clearly communicating expectations.
The final paper by Tatiana Mazza, Stefano Azzali and Luca Fornaciari focuses on the audit quality (AQ) of outsourced information technology controls (ITCs) and addresses the question of the relation between the AQ of outsourced (ITCs) and information technology audit quality (ITAQ). The authors focus specifically on the AQ of outsourced ITC and a relevant component of ITAQ. Using a sample of Italian listed companies, they find that the AQ of outsourced ITC is strongly and directly related to ITAQ. An important implication of the findings of the study is that, given that the scoping and planning phases of the audit cycle account for at least 69 per cent of ITAQ, companies and auditors can improve ITAQ through a better organisation of ITAQ scoping and planning activities, and improve the AQ of outsourced ITC by directly evaluating the service provider location.
In conclusion, the papers included in this themed issue of Managerial Auditing Journal have considered aspects of audit quality from different perspectives and different research orientations. The findings presented in this issue serve to highlight the complexity and inter-related nature audit quality. The findings of the papers also make a number of important contributions to the literature concerned with the nature of audit quality. In addition, the findings of the papers have significant implications for audit clients, audit firms, the accounting and audit profession, regulators and policy makers. My hope is that academics, professional bodies, regulators and policy-makers will find the papers in this themed issue a useful contribution to the current state of our knowledge of the nature of, and the debate concerning, audit quality. I would like to thank all of the reviewers for their time and expertise in reviewing the papers and providing constructive and insightful comments on them. I would also like to thank all of those associated with Managerial Auditing Journal for their guidance throughout the process.