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