Determinants of Audit Quality and Connections with Economic Development and Education

Abstract

The audit has been mentioned in documents since antiquity, even if the term is not the same, and its connotations have undergone major changes. There are many topics in the economic literature connected with the audit, but one of the most important and debated by specialists is the quality of the audit. And this was viewed over time in continuous evolution. A multitude of possible determinants have been stated theoretically and investigated empirically. Our study mentions several such factors, the ones that were the most stable over time, remaining continuously in the attention of researchers. Since they are very numerous, I have cataloged them by belonging to one of the elements that revolve around the audit: the inputs to the audit mechanism, the processes, outputs and results from the audit mechanism, the market context, premature approvals or methods and practices to reduce voluntary quality. I did not select the determinants randomly, but in such a way that some macroeconomic factors of the quality of the audit can be deduced from them. We thus identified that, at least theoretically, audit quality can be associated with economic development, general education, and financial education. To research these associations, we resorted to international data, performing both univariate and bivariate descriptive analysis based on maps, as well as a multivariate analysis based on hierarchical clustering. Due to the different typology of the available variables, we performed standardization to bring them all to the same statistical distribution, with possible values between 0 and 100. Hierarchical clustering uses Ward linkage for the grouping of units and the Euclidean distance between them. The groupings show a certain hierarchy between the groups in relation to the observed variables, but this is not perfect, as there are also atypical behaviors. We managed to identify some common behavioral patterns of the world’s countries, which we analyzed both economically and geographically.