Audit quality: Attributes, private safeguards and the role of regulation
AbstractThis 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.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 452.
Date of creation: Jan 2000
Date of revision:
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Web page: http://www.econ.upf.edu/
Auditing; quality; self-enforcement; regulation; diversification;
Other versions of this item:
- 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.
- 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 - - Accounting - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-04-17 (All new papers)
- NEP-LAW-2000-04-17 (Law & Economics)
- NEP-REG-2000-04-11 (Regulation)
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