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Dissertation
Assessing actual audit quality
Doctor of Philosophy (Ph.D.), Drexel University
May 2004
DOI:
https://doi.org/10.17918/etd-296
Abstract
Prior audit quality research has adopted a variety of measures for audit quality. Since actual audit quality is unobservable before and when the audit is conducted, market-perceived audit quality proxies have been widely used. However, no research has examined whether market-perceived audit quality can appropriately proxy for actual audit quality. This study addresses the research question "does market-perceived audit quality capture actual audit quality?" Using a post hoc identification of "apparent audit failures" as cases of poor actual audit quality, this study examines whether poor actual audit quality is related to higher levels of earnings managementand to smaller analysts' forecast errors. This study uses a matched-pair design, matching each audit failure company with a similar non-audit failure company. In investigating the first research question, value relevance of accounting information is used as the measure of market-perceived audit quality. By comparing value-relevance of accounting information across audit failure and non-audit failure groups, this study documents that accounting information is less value-relevance for audit failure group. This result suggests that the market appears to assess actual audit quality accurately and, therefore, market-perceived audit quality can be used as the proxy for actual audit quality. Consistent with prior studies, discretionary accruals are estimated to measure earnings management. Compared with the non-audit failure group, the audit failure group exhibits higher levels of discretionary accruals. The result supports my hypothesis that poor actual audit quality is associated with higher levels of earnings management. The results of this study do not reveal any statistically significant relationship between actual audit quality and financial analysts' forecast errors.
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Details
- Title
- Assessing actual audit quality
- Creators
- Li Dang - DU
- Contributors
- Kevin F. Brown (Advisor) - Drexel University (1970-)
- Awarding Institution
- Drexel University
- Degree Awarded
- Doctor of Philosophy (Ph.D.)
- Publisher
- Drexel University; Philadelphia, Pennsylvania
- Resource Type
- Dissertation
- Language
- English
- Academic Unit
- Bennett S. LeBow College of Business; Drexel University
- Other Identifier
- 296; 991014632391304721