CC Sheds Light on Academic Audit Research
The Competition Commission has published an initial literature review of the audit market.
The Review of relevant academic literature has been produced by professor Vivien Beattie of Glasgow University.
The report presents a raft of research on audit quality, volume and methodology, auditor independence, as well as analytical and archival research.
There is research on the impact of audit rotation, with arguments in favour of audit partner rotation as opposed to changes at firm level.
On audit rotation, the report cites specialism at city level [Reichelt and Wang 2010] as a benefit, endorsing the value of a national and industry-specific industry specialist.
Beattie et al (2011a) conducted a survey of 498 UK listed company CFOs, audit committee chairs (ACCs) and audit partners in 2007 to obtain views on the impact of 36 economic and regulatory factors on audit quality post-SOX. All groups rated various audit committee interactions with auditors among the factors most enhancing audit quality.
However, International Standards of Accounting (ISAs) and the audit inspection regime and aspects of the ‘standards-surveillance-compliance’ regulatory system, were viewed as less effective.
It also considers the impact of advertising and promotion on the tendering process and subsequent pitches to win new audit business, and explores the rise in the level of non-audit services and current audit fee models.
The paper provides an overview of academic literature and excludes official reports such as EC papers and Audit Inspection Unit (AIU) reports.
The paper is open for comment until Friday 18 May.
To respond to the report, click HERE