Issues raised by studying DeFond and Zhang: What should audit researchers do?

John Donovan, Richard Frankel, Joshua Lee, Xiumin Martin and Hojun Seo

Journal of Accounting and Economics, 2014, vol. 58, issue 2, 327-338

Abstract: We view audit-quality choice as one among many that managers make to maximize firm value. We question whether audit-quality differences among publicly traded companies are of significant interest to investors, clients, and auditors and ask for research on this topic. Relatedly, we ask for research on whether auditors and their clients show behavior consistent with regulated audit quality exceeding the audit quality level demanded absent regulation. We propose that researchers incorporate the competitive advantages of auditors and the institutional features of the audit process into the definition of audit quality. We propose that audit quality research test for externalities and inefficiencies to understand whether auditors and their clients are choosing the efficient level of audit quality. We note the legislative, judicial, and executive powers residing in the PCAOB.

Keywords: Auditors; Audit quality; Regulatory intervention; PCAOB (search for similar items in EconPapers)
JEL-codes: M3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:58:y:2014:i:2:p:327-338

DOI: 10.1016/j.jacceco.2014.09.001

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