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.
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Quality Audit?
defined as systematic and independent examination
AUDITORS AND PRODUCT DIFFERENTIATIONS OF AUDIT STRATEGIES
Unique Products
Enhancing Its Products
Maintains Competitive Advantage
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
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.
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(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
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
GROUP 1
Audit quality will lead to quality audit
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Foziah Ramli
Faridah Hashim
Ahmad Rizal Ab Manan