Audit Quality Assessment - Doc

Added on - 21 Apr 2020

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Running head: AUDIT QUALITYAudit QualityName of the StudentName of the UniversityAuthor’s Note
1AUDIT QUALITYIntroductionIn 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 andaccounting statements of the business organizations (Arens, Elder and Mark 2012). Morespecifically, auditing is the process of examining the financial statements of the companies inorder to make sure that they are free from any kind of material misstatements. Thus, it is requiredfor every business organizations to have their financial statements audited (William Jr, Gloverand Prawitt 2016). Most importantly, it is the responsibility of the auditors to maintain thequality of their audit program at the time of audit assessment. It can be seen that externalaccounting 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 aresome major factors that have impacts on the audit quality (Louwerset al.2015). At the sametime, it is required to follow a certain procedure at the time of audit quality assessment. Thus, themain 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 qualityassessment.Key Elements that has Impact on Audit QualityAccording to the above discussion, there are certain factors that have impact on the auditquality. Thus, it is required for the auditors to consider all the factors. The major factors havingimpact on audit quality are discussed below:
2AUDIT QUALITYThe first factor isInternal Control. Internal control provides necessary assurance to theauditors for the achievements of audit objectives. For this reason, the auditors need to considerthe internal control of the companies at the time of audit operation, as the weaknesses of internalcontrol are subjects to be investigated (ijbssnet.com 2017). Thus, the effectiveness of internalcontrol has impact on audit quality. The next crucial factor is theSize of Audit Firms. Due tothe difficulties in the measurement of audit quality, many researchers consider the size of auditfirm as a major factor having impact on the audit quality. It has been seen that large audit firmsuse more powerful tests for assessing the audit quality. As a result of this, large audit firms areassumed to be involved with more specific audit information as compared to the small firms. Thenext factor isFees of the Auditors. Many researcher consider that there is a relationshipbetween audit quality and auditor’s fees (Knechelet al.2012). The audit services are consideredas quality-differentiated in the competitive market and the quality differentiated are reflected inaudit fees. For this reason, the companies are willing to pay higher amount of fees in order to gethigher audit quality. The next important factor isAuditor’s Independence. Independent auditcommittee helps in the enhancement of external auditors’ independence and it makes sure thatthe auditors are free from any kind of managerial influence. Thus, auditor’s independence isconsidered as the heart of integrated audit process thus, auditors are able to provide high qualityof audit by complying with the principles of auditor’s independence (Gruenet al.2012).The next important factor isReputation of the Auditors. It needs to be mentioned thatthe 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 ofaudit, as they are able to extract the crucial information for auditing. It is considered thatcompanies build reputations by providing high quality of audit services. The next crucial factor
3AUDIT QUALITYisIndustry Specialization. It needs to be mentioned that there is a major relation between auditquality and specialization of industry. It has been observed that there are fundamental differencesin the characteristics of error detection methods for different industries. For this reason, auditorshaving expertise in specific industry will be able to provide quality audit services to thecompanies. For this reason, it is considered as an important factor. The next important factor isQuality and Proficiency of the Auditors. The main aim of audit operation is to make sure thatthe financial statements of the companies are free from any kind of material misstatement. In theaudit 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 havespecific knowledge in various audit factors. Thus, the auditors having high qualification andknowledge will be able to provide quality audit work. Thus, from the above discussion, it can beseen there are many factors that have impacts on the audit quality of the companies. For thisreason, it is the duty of the auditors to take into consideration all these above-mentioned factorsof audit quality.Audit Quality Assessment ProcessAudit Quality Assessment refers to the process of the evaluation of audit program of thecompanies. Thus, it is necessary for the business organizations to conduct the audit qualityassessment. Audit quality assessment can be seen for both internal audit and external audit. Theaudit quality assessment of both internal and external audit is discussed below:Internal Audit Quality AssessmentSome specific stages can be seen in the process of the quality assessment of internalaudit. The first step isInternal Assessment. This is considered as one of the major factors for
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