Audit firm governance: Do transparency reports reveal audit quality?

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Abstract

As a result of legal and regulatory requirements, audit firms in certain jurisdictions have recently started issuing transparency reports containing information on audit firm governance. In this study we investigate whether audit firm governance disclosure is associated with actual audit quality. Based on a sample of transparency reports of 103 audit firms in a number of EU countries, we find that there is variation in the extent and type of governance disclosures across audit firms. We, however, do not find an association with actual audit quality, apart from a weak association with an audit firm's statement on the effectiveness of its internal quality control system.

Original languageEnglish
Pages (from-to)193-214
Number of pages22
JournalAuditing-a Journal of Practice & Theory
Volume31
Issue number4
DOIs
Publication statusPublished - Nov 2012

Keywords

  • corporate governance
  • audit firm
  • transparency report
  • EARNINGS MANAGEMENT
  • ABNORMAL ACCRUALS
  • COEFFICIENT ALPHA
  • RELIABILITY
  • SIZE
  • FEES

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