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Audit quality: attributes, private safeguards and the role of regulation

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  • Benito Arrunada

Abstract

This article examines the private mechanisms used to safeguard quality in auditing, with a view to defining rules capable of facilitating the performance of market forces. An outline is given of a general theory of private quality assurance in auditing, based on the use of quasi-rents to self-enforce quality dimensions. Particular attention is paid to the role of fee income diversification as the key ingredient of private incentives for audit quality. The role of public regulation is then situated in the context defined by the presence of these safeguard mechanisms. This helps in defining the content of rules and the function of regulatory bodies in facilitating and strengthening the protective operation of the market. By making sense of the interaction between regulation, quality attributes and private safeguards, the analysis helps to evaluate the relative merits of different regulatory options.

Suggested Citation

  • Benito Arrunada, 2000. "Audit quality: attributes, private safeguards and the role of regulation," European Accounting Review, Taylor & Francis Journals, vol. 9(2), pages 205-224.
    • Handle: RePEc:taf:euract:v:9:y:2000:i:2:p:205-224
    DOI: 10.1080/09638180050129873
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    Cited by:

    1. D'Agosto, Elena, 2007. "Auditing Issues across Countries: an Explorative Approach to the Regulation Framework," MPRA Paper 50989, University Library of Munich, Germany.
    2. Georgios C. Baltos & Filippa S. Chomata & Ioannis G. Vidakis, 2018. "Quality Management, Standardization and Auditing Meet Multiple Organizational Risks, Strengthening Open Market Understanding and Social Responsibility," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 7, November.
    3. Shaoul, Jean & Stafford, Anne & Stapleton, Pamela, 2012. "Accountability and corporate governance of public private partnerships," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 23(3), pages 213-229.
    4. Speklé, R.F. & van Elten, H.J. & Kruis, A.M., 2005. "Sourcing of Internal Auditing: An Empirical Study," ERIM Report Series Research in Management ERS-2005-046-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    5. Benito Arruñada, 2005. "Managing competition in professional services and the burden of inertia," Economics Working Papers 827, Department of Economics and Business, Universitat Pompeu Fabra.

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    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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