Improving Audit Quality: Strategies and Research

This assignment delves into the crucial topic of audit quality. It examines various strategies employed to improve audit quality, drawing upon research insights from academic publications and professional organizations like the AICPA and IIA. The focus includes analyzing the relationship between audit fees and quality, the impact of joint audits on audit effectiveness, and the role of specific indicators in assessing the overall quality of audit engagements.

Running head: AUDIT QUALITY
Audit Quality
Name of the Student
Name of the University
Author’s Note

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Introduction
In today’s business environment, Auditing is considered as one of the major aspects.
Auditing refers to the process of conducting official financial inspections of the financial and
accounting statements of the business organizations (Arens, Elder and Mark 2012). More
specifically, auditing is the process of examining the financial statements of the companies in
order to make sure that they are free from any kind of material misstatements. Thus, it is required
for every business organizations to have their financial statements audited (William Jr, Glover
and Prawitt 2016). Most importantly, it is the responsibility of the auditors to maintain the
quality of their audit program at the time of audit assessment. It can be seen that external
accounting professionals are appointed for assessing the quality of audit operations. Hence,
maintaining audit quality is important for the auditors. It needs to be mentioned that there are
some major factors that have impacts on the audit quality (Louwers et al. 2015). At the same
time, it is required to follow a certain procedure at the time of audit quality assessment. Thus, the
main aim of this report is to analyze and evaluate various aspects of audit quality assessment.
The following part of the report discusses various aspects of audit quality and audit quality
assessment.
Key Elements that has Impact on Audit Quality
According to the above discussion, there are certain factors that have impact on the audit
quality. Thus, it is required for the auditors to consider all the factors. The major factors having
impact on audit quality are discussed below:

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The first factor is Internal Control. Internal control provides necessary assurance to the
auditors for the achievements of audit objectives. For this reason, the auditors need to consider
the internal control of the companies at the time of audit operation, as the weaknesses of internal
control are subjects to be investigated (ijbssnet.com 2017). Thus, the effectiveness of internal
control has impact on audit quality. The next crucial factor is the Size of Audit Firms. Due to
the difficulties in the measurement of audit quality, many researchers consider the size of audit
firm as a major factor having impact on the audit quality. It has been seen that large audit firms
use more powerful tests for assessing the audit quality. As a result of this, large audit firms are
assumed to be involved with more specific audit information as compared to the small firms. The
next factor is Fees of the Auditors. Many researcher consider that there is a relationship
between audit quality and auditor’s fees (Knechel et al. 2012). The audit services are considered
as quality-differentiated in the competitive market and the quality differentiated are reflected in
audit fees. For this reason, the companies are willing to pay higher amount of fees in order to get
higher audit quality. The next important factor is Auditor’s Independence. Independent audit
committee helps in the enhancement of external auditors’ independence and it makes sure that
the auditors are free from any kind of managerial influence. Thus, auditor’s independence is
considered as the heart of integrated audit process thus, auditors are able to provide high quality
of audit by complying with the principles of auditor’s independence (Gruen et al. 2012).
The next important factor is Reputation of the Auditors. It needs to be mentioned that
the reputation of the auditors has direct relationship with the audit quality of the businesses.
According to the investors, audit firms having high reputation are able to provide high quality of
audit, as they are able to extract the crucial information for auditing. It is considered that
companies build reputations by providing high quality of audit services. The next crucial factor

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is Industry Specialization. It needs to be mentioned that there is a major relation between audit
quality and specialization of industry. It has been observed that there are fundamental differences
in the characteristics of error detection methods for different industries. For this reason, auditors
having expertise in specific industry will be able to provide quality audit services to the
companies. For this reason, it is considered as an important factor. The next important factor is
Quality and Proficiency of the Auditors. The main aim of audit operation is to make sure that
the financial statements of the companies are free from any kind of material misstatement. In the
audit process, the auditors have to conduct different processes like development of audit plan,
development of audit workforce plan and others. For this reason, the auditors need to have
specific knowledge in various audit factors. Thus, the auditors having high qualification and
knowledge will be able to provide quality audit work. Thus, from the above discussion, it can be
seen there are many factors that have impacts on the audit quality of the companies. For this
reason, it is the duty of the auditors to take into consideration all these above-mentioned factors
of audit quality.
Audit Quality Assessment Process
Audit Quality Assessment refers to the process of the evaluation of audit program of the
companies. Thus, it is necessary for the business organizations to conduct the audit quality
assessment. Audit quality assessment can be seen for both internal audit and external audit. The
audit quality assessment of both internal and external audit is discussed below:
Internal Audit Quality Assessment
Some specific stages can be seen in the process of the quality assessment of internal
audit. The first step is Internal Assessment. This is considered as one of the major factors for

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the assessment of audit quality. In this process, certain steps need to be followed for assessing
the audit quality; they are planning for engagement, supervision, standardize the working
processes, procedures for paperwork, review of reports and others. Most importantly, this
particular process helps in the identification of the major strengths and weaknesses of the internal
control system. In this process, the auditors of the companies have to comply with the principles
and standards of Code of Ethics (theiia.org 2017). The second process is Ongoing Monitoring.
Ongoing monitoring of performance is considered as another major process for assessing the
quality of audit. Certain processes support the ongoing monitoring processes of internal audit.
First, it is required to establish the foundation of internal audit activity. Second, it is required to
have routine practice for assessing the internal audit quality like supervisory review, approval of
work and others. In this aspect, it is required to adequate supervision as it is considered as the
most fundamental and important aspect for assessing the quality of internal audit. Another
important process under ongoing monitoring is the development of Key performance indicators
(KPI) (Gavin et al. 2012). KPIs help the investors and shareholders in providing valuable insight
into the internal audit process of the organizations. The next process is Periodic Self-
Assessment. This particular process helps in ensuring the fact that the internal audit is complied
with all audit standards, code of ethics and regulatory requirements. There are several techniques
under periodic self-assessment for assessing the internal audit quality. One of the major
techniques under this is survey guide that helps in the monitoring of stakeholder’s input in the
audit process. In this aspect, it is required to mention the fact that in both of the processes, it is
required to develop effective audit team for assessing the audit quality. These are the major
processes for assessing the internal audit quality.
External Audit Quality Assessment

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In case of quality assessment of external audit, the process of different from internal
audit. There are four stages in the assessment of external audit quality. The first step is
Planning. In this process, the scope and objectives of quality assessment is set for quality
assessment. This process also includes the development of quality assessment team. In addition,
the review of workplace is also done in this step. The second step is Off-Site Work. In this
process, the review of planning document is done. After that, all the necessary documents are
also reviewed for audit quality assessment. Lastly, all the survey responses are reviewed. The
next step is On-Site Work (theiia.org 2017). This is a major step in the process of audit quality
assessment. In this step, the interviews of clients, staffs and stakeholders are done for audit
quality assessment. After that, review of all the documents is done on a thorough basis so that
they can be summarized. Lastly in this stage, discusses is done among the assessment team
members. This is a crucial stage as the assessment team taken important decisions regarding
quality assessment of external audit system. The next step is Evaluation and Development of
Report. In this step, the evaluation of external audit process is done against the resources of the
companies in order to measure the effectiveness of external audit (Asthana and Boone 2012).
After that, all the issues of external audit is summarized so that effective recommendations can
be made. Lastly, the draft report needs to be issued. Thus, based on the above discussion, it can
be seen that the above-discussed steps are required for the assessment of external audit process
of the companies. Hence, the above discussion shows that the quality assessment process of
internal audit and external audit is different.
Recommendations to Enhance Audit Quality
There are certain ways for enhancing the quality of an audit. Some of those major
techniques are discussed below.

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It is recommended that there needs to be effective leadership in the audit process. It is the
responsibility of senior auditors to ensure the fact that the auditing staffs have access to all the
necessary resources as well as time to solve different audit engagement issues (aicpa.org 2017).
In addition, the senior auditors are required to communicate audit code of conducts with the audit
staffs on a regular basis. After that, the quality of audit will be enhanced in case the auditors
perform sufficient background check of the audit clients before engagement of any audit
operation (journalofaccountancy.com 2017). It is highly recommended that the companies need
to hire highly knowledgeable audit experts so that quality audit can be performed for the
companies. There is a requirement of effective training and education facilities for the auditing
staffs; the main aim of this training and development program is to increase the competency on
the auditing staffs (Deng et al. 2014). Next, it is recommended for the establishment of quality
control department, as it will help to retrain the quality of audit processes in the organizations.
Some of the major benefits of having quality control department are the development of
accounting and auditing guidance; provide technical consultation; development of assurance
policies and others. It is recommended to the auditors that they should streamline their different
audit processes (njcpa.org 2017). In this process, it needs to be ensured that all the auditing staffs
are engaged with the audit program. Apart from this, it is also recommended that the auditors are
required to increase their industry specialization so that they can conduct audit operations in the
companies of all industries. Thus, the above are the key recommendations for enhancing the
quality of an audit.
Conclusion
The main aim of this study is to analyze and evaluate various aspects of audit quality in
the business organizations. Based on the above discussion, it can be seen that certain factors have

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major effects on the audit quality of the companies. Some of those major aspects are internal
control, size of the audit firms, fees of the auditors, independence of the auditors, auditor’s
reputations, specialization of industry and quality of the auditors. The above discussion also
shows the fact that certain processes or steps are followed at the time of assessing the quality of
audit in the companies. However, the audit quality assessment process of internal audit and
external audit are different from each other; but the main aim of audit quality assessment to
analyze and evaluate the performance of audit process. According to the above study, it can also
be seen that the quality of audit can be enhanced with the help of certain techniques; some of
them are effective audit leadership, sufficient background check, hiring of knowledgeable
experts, training and development program and others. Thus, based on the whole discussion, it
can be concluded that assessment and maintenance of audit quality is an important duty for the
auditors.

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References
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