ABSTRACT
In order to discuss audit quality, it is necessary to first define what we mean by an audit. Knechel et al. (2013a: 2) describe an audit as “a professional service delivered by experts in response to economic and regulatory demand.” They then go on to discuss a number of multidimensional attributes that define an audit. 1 First, demand for an audit is driven by economic risks; therefore, incentives are influential. Second, audits are not designed to provide absolute assurance; thus, the outcome of an audit is uncertain. This uncertainty plays a role in the audit process. Third, due to variations in client characteristics, audit teams, and other environmental factors, each audit engagement is unique so the idiosyncratic nature of engagements matters. Fourth, an audit is a systematic process used to obtain reasonable assurance, i.e., the process is important. Finally, successful execution of an audit requires a great deal of judgment by professionals with adequate knowledge and expertise – i.e., professional judgment matters. As will be discussed, each of these characteristics plays a role in the audit process and uniquely influences audit quality.
