External Audit Quality: Determinants Based Literature Review

Audit is not a new concept in this era. Audit is an independent examination of financial statements to ensure they are true and fair. But several financial scandals have raised doubts about the role of auditors. These events pushed researchers to study audit quality more closely. Audit quality is not only about technical knowledge. It also depends on independence, judgement, effort, and the setting in which the audit is carried out. This paper reviews prior and recent studies on external audit quality. It explains how audit quality is defined, why it is difficult to observe, and how it is measured in academic research. Here, study found that there is no single measurement to evaluate the audit quality. Researcher must use proxies such audit fee, auditor & client size, auditor independence, financial restatements, going concern opinion, earnings quality etc. as variables to evaluate the audit quality. With the passage of time the researchers suggesting new proxies which infer more reliable information about the quality of the audit.