Audit Quality and Its Influence on Stakeholder Trust: A Qualitative Analysis
Main Article Content
Abstract
This qualitative study aims to explore the intricate relationship between audit quality and stakeholder trust in financial reporting. Through in-depth interviews with auditors, investors, regulators, and corporate executives, insights were gathered regarding perceptions, experiences, and expectations concerning audit quality and its influence on stakeholder trust. Thematic analysis revealed key dimensions of audit quality, including auditor independence, competence, objectivity, adherence to professional standards, and perceptions of audit effectiveness. Stakeholders emphasized the importance of transparent disclosure practices, accountability in corporate governance, credibility of auditors and financial statements, and regulatory oversight in fostering trust in financial reporting. The findings underscored the pivotal role of regulatory bodies, such as the PCAOB and SEC, in promoting audit quality, deterring fraudulent behavior, ensuring auditor accountability, and maintaining market confidence. Overall, the study contributes to a deeper understanding of the mechanisms shaping stakeholders' perceptions of audit quality and trust in financial reporting, with implications for market efficiency, investor protection, and corporate governance.
Article Details
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
References
Abbott, L. J., Parker, S., & Peters, G. F. (2003). Audit committee characteristics and restatements. Auditing: A Journal of Practice & Theory, 22(1), 71-87. https://doi.org/10.2308/aud.2003.22.1.71
Akther, S. (2020). The moderating role of financial reporting council on the audit expectation gap: Evidence from Bangladesh. Managerial Auditing Journal, 35(8/9), 1204-1227. https://doi.org/10.1108/MAJ-08-2019-2393
Alhababsah, R. (2016). Corporate governance mechanisms and audit quality: Evidence from Saudi Arabia. Corporate Ownership & Control, 13(4), 129-142. https://doi.org/10.22495/cocv13i4p9
Ardelean, A. (2013). Auditors' ethical behavior: The impact on clients' confidence. Procedia Economics and Finance, 6, 33-44. https://doi.org/10.1016/S2212-5671(13)00007-7
Braun, V., & Clarke, V. (2006). Using thematic analysis in psychology. Qualitative Research in Psychology, 3(2), 77-101. https://doi.org/10.1191/1478088706qp063oa
Bryman, A. (2016). Social research methods (5th ed.). Oxford University Press.
Creswell, J. W., & Creswell, J. D. (2017). Research design: Qualitative, quantitative, and mixed methods approaches (5th ed.). SAGE Publications.
DeAngelo, L. E. (1981). Auditor independence, “low balling”, and disclosure regulation. Journal of Accounting and Economics, 3(2), 113-127. https://doi.org/10.1016/0165-4101(81)90021-4
Francis, J. R. (2011). A framework for understanding and researching audit quality. Auditing: A Journal of Practice & Theory, 30(2), 125-152. https://doi.org/10.2308/ajpt-10181
Gul, F. A., Fung, S. Y. K., Jaggi, B., & Krishnan, G. V. (2013). Auditor choice, audit fees, and auditor reputation: Evidence from aggressive earnings management. Contemporary Accounting Research, 30(4), 1264-1295. https://doi.org/10.1111/1911-3846.12009
Hayes, R. M. (2017). The role of risk management and governance in determinants of audit quality. Managerial Auditing Journal, 32(7), 603-623. https://doi.org/10.1108/MAJ-07-2016-1404
Holm, C. (2012). Trust and ethics in auditing. European Accounting Review, 21(3), 533-546. https://doi.org/10.1080/09638180.2012.660949
Hossain, M., Khan, M. A., & Wu, S. D. (2020). Regulatory enforcement and investor confidence: Evidence from China. Journal of International Financial Markets, Institutions and Money, 67, 101222. https://doi.org/10.1016/j.intfin.2020.101222
Hossain, M., Raman, K., & Tan, H. (2020). Regulatory oversight and audit quality in the Australian market. Australian Accounting Review, 30(2), 191-210. https://doi.org/10.1111/auar.12269
Hubais, A. (2023). The role of auditor integrity in the audit process. International Journal of Auditing, 27(1), 3-17. https://doi.org/10.1111/ijau.12268
Hwang, A., Evans, J. H., & Yao, J. (2020). The effect of reputation incentives on trust and trustworthiness in auditing. Auditing: A Journal of Practice & Theory, 39(1), 93-114. https://doi.org/10.2308/ajpt-52621
Krishnan, J. (2005). Audit quality and the pricing of discretionary accruals. Auditing: A Journal of Practice & Theory, 24(1), 115-133. https://doi.org/10.2308/aud.2005.24.1.115
Lennox, C. (2005). Audit quality and executive officers’ affiliations with CPA firms. The Accounting Review, 80(3), 661-681. https://doi.org/10.2308/accr.2005.80.3.661
Lennox, C. S. (2005). Audit quality and executive officers’ affiliations with CPA firms. Journal of Accounting and Economics, 39(2), 201-231. https://doi.org/10.1016/j.jacceco.2004.11.002
Lincoln, Y. S., & Guba, E. G. (1985). Naturalistic inquiry. SAGE Publications.
Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734. https://doi.org/10.5465/amr.1995.9508080335
Palazuelos, E. (2018). The influence of audit quality on the financing decisions of small and medium-sized enterprises: Evidence from Spain. Journal of Small Business Management, 56(4), 583-601. https://doi.org/10.1111/jsbm.12375
Palmrose, Z. (1986). Audit fees and auditor size: Further evidence. Journal of Accounting Research, 24(1), 97-110. https://doi.org/10.2307/2491036
Patton, M. Q. (2015). Qualitative research & evaluation methods: Integrating theory and practice (4th ed.). SAGE Publications.
Public Company Accounting Oversight Board (PCAOB). (2012). Auditing standards. PCAOB. https://pcaobus.org/standards
Public Company Accounting Oversight Board. (2012). Auditing standard no. 5: An audit of internal control over financial reporting that is integrated with an audit of financial statements (Revised). PCAOB. https://pcaobus.org/Standards/Auditing/pages/auditing_standard_5.aspx
Simunic, D. A. (1984). Auditing, consulting, and auditor independence. Journal of Accounting Research, 22(Supplement), 679-702. https://doi.org/10.2307/2490776
Sulaiman, J. (2011). A multidimensional conceptualization of audit quality. Managerial Auditing Journal, 26(5), 371-383. https://doi.org/10.1108/02686901111126778
Tanyi, P. N., Katusiimeh, M. W., & Agyei, S. K. (2020). Quality of financial reporting, audit quality and audit firm size in emerging markets: evidence from Ghana. International Journal of Accounting and Information Management, 28(3), 423-448. https://doi.org/10.1108/IJAIM-01-2019-0010
Tanyi, P. N., Khan, M. A., & Liu, B. (2020). The impact of audit technology and methodology on audit quality enhancement: Evidence from China. Journal of International Accounting, Auditing and Taxation, 38, 100311. https://doi.org/10.1016/j.intaccaudtax.2019.100311
Yuniarti, N. (2013). The effect of auditor performance on client satisfaction with the audit process. Procedia-Social and Behavioral Sciences, 107, 131-140. https://doi.org/10.1016/j.sbspro.2013.12.412