People and Audit Process Attributes of Audit Quality: Evidence From Malaysia

Abstract

This study seeks to add to understanding of the concept and attributes of audit quality from the perspective of those responsible for delivery audit services, the auditors, as a key constituent group in the auditing system. The study surveyed two groups of external auditors (group 1- audit partners and managerial level and, group 2 - senior auditors and junior auditors), as a basis to compare their perceptions on important of auditors and audit process attributes in achieving audit quality in practice. The study was conducted in the form of a survey, with data being gathered via questionnaire. Returned surveys from external auditors yielded a 37% response rate. Overall, top 5 highest rated attributes of audit quality reported to be most important in determining audit quality are: compliance with the International Standard Quality Control (ISCQ) 1, obtaining credible and sufficient audit evidence, technical expertise of audit team, audit work meeting the audit firms’ quality standards, and competency of the audit team. Further analysis shows that the two groups of respondents have differential views on attributes of audit quality in practice. Group 1 perceived attributes of audit quality are related to auditor’s assessment of risk and internal quality review procedures within the audit firm. In comparison, group 2 perceived auditors’ competency and compliance with relevant standards as indicators of audit quality. This study suggests differences in underlying view about attributes audit quality in practice by the two groups of auditors. Public accounting firms might be interested to understand such underlying differences so that efforts in improving audit quality in practice would be focusing on the key attributes that perceived to be important on delivery high-quality audit services. This study is significant by extending the literature on audit quality and also provides useful input to public accounting firms in improving audit quality in practice.

Accounting firms’ talent management practices: perceived importance and its impact on auditors’ performance

“…Ostensibly, these three TM practices were perceived to be significant as they were part of explicit ISQC 1 requirements. This finding is consistent with prior studies where matters related to ISQC 1 requirements have been generally perceived as having greater importance (Sulaiman et al , 2019).…”

“…The top three auditors’ performance attributes that the respondents perceived as important include auditors’ knowledge and skills, the ability to perform the audit in accordance with prescribed standards and regulations, and the ability to provide client service. Auditors’ competency and ability to perform an audit in accordance with standards were also identified among the top ten attributes of auditors’ performance, as perceived by auditors in a study by Sulaiman et al (2019) amongst auditors in Malaysia. Besides these three attributes, the respondents also placed high significance on two behaviours relating to QTB: premature sign-offs on an audit report and accepting weak explanations/representations from clients for audit evidence.…”

“…An auditor’s performance hinges on the auditor being able to perform the audit and subsequently issue an appropriate audit opinion based on the evidence obtained during the audit, in line with DeAngelo’s (1981) definition of audit quality involving the joint probability of auditors’ ability to perform audits to detect material misstatements and their behaviour in reporting those misstatements (Chadegani, 2011; Duff, 2004). Prior studies, including Sulaiman et al (2019); Zakaria et al (2013); and Duff (2004), have indicated that various auditor attributes and behaviours, such as competency, independence, professional judgement and quality threatening behaviours (QTB), have an effect on auditors’ performance. The significance of these attributes and behaviours in ensuring the quality of audits performed is also promulgated in the IAASB’s Framework for Audit Quality (IAASB, 2014), as well as the ISQC 1 [International Auditing and Assurance Standards Board (IAASB), 2009].…”

“…Recent accounting failures, such as Rolls-Royce, Mitie Group, Carillion and Bargain Booze, have raised concerns over auditors’ performance (Zandi et al , 2019). Researchers and the profession at large have emphasised the significance of auditors’ performance in terms of desired attributes and behaviours for performing an audit and reporting appropriately [Sulaiman et al , 2019; International Auditing and Assurance Standards Board (IAASB), 2014; Hussein and Hanefah, 2013]. Cameran et al (2018) asserted that audit team member attributes are crucial to an audit.…”

Moderating Effect of Implementation Risk-Based Auditing on Audit Quality

“…To reduce the level of risk accepted by the auditor, a risk-based audit needs to be carried out to achieve the audit objectives. According to (Sulaiman et al, 2019), the difference between risk-related audit methods and conventional audit methods lies in the method used. The auditor reduces his focus on testing individual transactions and focuses more on how test management addresses realization.…”