Audit Firm Culture
3 important questions on Audit Firm Culture
Audit performance deficiencies
Derived from individual audits, but a repeated instance of a similar type of audit issue is likely to be considered as a QC deficiency and included in the audit performance part of the Part II section of the report.
H1: QC deficiencies reported by PCAOB is negatively associated with audit quality
Audit Quality: restatement; auditor erroneously issues an qualified audit opinion on misstated financial statements --> Supported
H2: No association between QC deficiencies and audit profitability
Audit profitability: Audit fee/total hours -> Not supported – more QC, less knowledge, more hours (less effective in their audit) – profitability on engagement is lower
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