Conventions of Audit Quality: The Perspective of Public and Private Company Audit Partners

Abstract

SUMMARY This research is based on an in-depth analysis of 34 interviews with partners in Big 4, medium-sized, and small audit firms that specialize in private and/or public company audits, to explore how they understand the concept of audit quality. Two contrasting conventions—i.e., shared judgment norms—of audit quality emerge from the analysis. Public company audit partners in Big 4 firms espouse what we call the “model” audit quality convention, which considers that audit quality results from a technically flawless audit, where professional judgment is highly formalized, and quality is attested by a perfectly documented audit file that passes Canadian Public Accountability Board (CPAB) and PCAOB inspections. In contrast, partners working primarily on private company audits, regardless of their firm's size, endorse what we call the “value-added” audit quality convention, which considers that audit quality results from tailoring the audit to meet the client's unique needs, where professional judgment is unconstrained, and where quality is attested by the client's perception that the audit has given a better understanding of their financial situation and the associated risks and opportunities. Our analysis also reveals significant tensions within each of these two conventions, and a fear that the current regulatory framework for quality control might end up severely hurting audit quality.

The influence of clients on the social identities within the audit profession

“…Malmström, 2018;chapter 4 and 5). These social categories seem to particularly influence how one is socialized into the profession, as both this thesis, and previous research shows or indicates difference in perceptions of auditors, auditing, and professionalism among small client auditors and large client auditors (see Carrington et al, 2019;Collin et al, 2017;Gertsson, 2018;Malmström, 2018 for studies in the Swedish context; see Bagley et al, 2012;Brivot et al, 2018;Causholli et al, 2019;Durocher, Gendron & Picard, 2016;Ramirez, 2009 for studies in the Anglo-Saxon context). The social identity theory perspective should thus be benefited by integrating role theory, especially in professional contexts, as role expectations seem to influence perceptions of social groups.…”

“…Ramirez et al, 2015), who are predominately employed by the Big 4 audit firms (cf. Brivot et al, 2018;Causholli et al, 2019). The global (academic and audit profession) narrative of the audit arena is dominated by the idea of auditors serving the public interest.…”

“…However, the results also seem generalizable to the Anglo-Saxon context as Anglo-Saxon research also indicates differences between small client auditors and large client auditors (cf. Bagley et al, 2012;Brivot et al, 2018;Causholli et al, 2019;Durocher, Gendron & Picard, 2016;Ramirez, 2009).…”

The auditor : Creating a concept of the auditor through auditors' own perceptions and understandings of their work in relation to boundary-setting forces

“…Adding value to the client seems to be an important part of audit quality from the auditor's perspective (Broberg, 2013). A recent study by Brivot, Roussy, and Mayer (2018) explored how audit partners understand the concept of audit quality by interviewing partners in Big 4, medium-sized, and small audit firms specializing in private and/or public company audits.…”

JASP for Audit: Bayesian Tools for the Auditing Practice

“…The interface is user-friendly, and directly relates to audit processes and to the International Standards of Auditing (IFAC 2010a,b,c,d,e). Furthermore, JfA may increase efficiency and knowledge of audit theory by taking over the statistical heavy lifting from the auditor and guiding them through the audit process, thereby having the potential to increase audit quality by preventing common mistakes in planning, selecting, executing, and interpreting the sample (Brivot et al 2018).…”