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PRODUCT DIFFERENTIATION: AUDITOR BRAND NAME AND SPECIALISATION - Coggle…
PRODUCT DIFFERENTIATION: AUDITOR BRAND NAME AND SPECIALISATION
THE DEFINITIONS
Audit quality
as encompasses the
key elements
that create an environment which
maximizes
the likelihood that
quality audits
are
performed on a consistent basis
.
The responsibility for performing quality audits of financial statements rests with auditors
audit quality is best achieved
in an environment where there is
support from and appropriate interactions
among participants in the financial reporting supply chain
Quality Audit?
defined as
systematic and independent examination
(Wikipedia)
Is the
process of systematic examination of a quality system
carried out by an internal or external quality auditor or an audit team. It is an important part of an organization's quality management system and is a key element in the ISO quality system standard, ISO 9001
How is audit quality measured?
by the outcome, the audit opinion issued
if the opinion issued is 'clean', and something subsequently goes wrong, then it is presumed that the quality of the audit carried out is sub-standard
AUDITORS AND PRODUCT DIFFERENTIATIONS OF AUDIT STRATEGIES
Unique Products
Enhancing Its Products
Maintains Competitive Advantage
Porterís (1985)
Supply Specialized Services That Meet Client Needs In Ways That Are Not Replicated
Easily By Competing Audit Firms
Klein And Leffler (1981) And Shapiro (1983)
The Supply Of Quality Audit Services
Within A Competitive Market Is Consistent With The Theory Of Product Differentiation
Jensen And Meckling (1976), Watts And Zimmerman (1986) And Simunic And Stein (1987)
The Demand For Quality Differentiated Audit Services
Using The Agency And Costly Contracting Frameworks.
BIG FOUR VS. NON-BIG FOUR: DOES IT MATTER
AUDIT QUALITY & LIABILITY
RESOURCES
INDUSTRY SPECIALISATION & BRAND NAME
CLIENTS’ SIZE
CONCLUSIONS
Big firms are insignificantly different in term of audit quality, but confirms in term of client characteristics
Brand name is significant in determining the audit fees, but insignificant in term of specialization
Shouldering the liability on fraud and irregularities – less risk for big 4
Audit quality will lead to quality audit
GROUP 1
Foziah Ramli
Faridah Hashim
Ahmad Rizal Ab Manan