Audit Quality in New Zealand – Early Evidence from the Regulator

Abstract

This study examines the impact of audit regulation in New Zealand, using audit quality reviews undertaken by the Financial Markets Authority (FMA) between 2013 and 2017. Regulation has more than halved the number of registered audit firms indicating that it imposes costs on audit firms. The results show that audit quality is improving, but a high proportion of audits do not meet the FMA's requirements. A key area for improvement is the consistency of quality across audits performed by the same audit firm. The FMA advises audit firms to investigate the underlying cause of audit deficiencies to ensure that internal quality control systems are effective in producing high‐quality audits on a regular basis. A comparison of audit file ratings with the United Kingdom shows that New Zealand's audit quality is much lower. The variation in audit quality across countries concerns the International Forum of Independent Audit Regulators (IFIAR) as it has the potential to undermine stakeholder confidence in the audit industry. Thus monitoring progress in improving audit quality in New Zealand is important. This paper provides insights into audit quality at a country level, whereas most research focuses on the firm level.

Audit Quality, Climate Risk Disclosures and Ethical Guidance (eCode)

“…Rainsbury () provides a literature review on audit quality frameworks and the related empirical evidence. The paper then examines the New Zealand Financial Market Authority's audit inspection reviews from 2013 and 2017.…”

“…Rainsbury () notes that there is no universal agreement on what ‘audit quality’ means or how it is measured. This is reflected in the range of research approaches.…”

The effect of audit inspections on audit fees

“…An impact of audit regulation has been an increased concentration of the audit market with fewer audit firms of FMC Reporting Entities. From 2013 to 2016, there was a 47.5% drop in the number of audit firms; decreasing from 40 to 21 firms [4] (Rainsbury, 2019). The Financial Markets Authority (FMA) (2018) attributes the drop in numbers to audit firms being unable to meet audit rotation requirements and the need for two audit partners to be involved in FMC Reporting Entity audits.…”

El origen de ingresos del auditor y calidad de la auditoría: el caso español

“…La calidad de la auditoría es un tema recurrente en la literatura, cuyo interés abarca tanto a académicos como a profesionales del sector, a administradores de empresas y a reguladores (Saeed et al, 2020;Greenwood & Zhan, 2019;Rainsbury, 2019;Aobdia et al, 2015;Tepalagul & Lin, 2015). Sin embargo, la calidad es un concepto cualitativo e inobservable que dificulta su evaluación (DeAngelo, 1981), lo que hace necesario recurrir a otros parámetros que la representen y permitan cuantificarla por aproximación.…”