Bridging the Distance: Spatial and Social Factors Influencing Audit Quality and Auditor Independence in Small and Medium-Sized Enterprises

Audit quality is crucial, particularly for small and medium-sized enterprises (SMEs), due to their significant economic role. This study examined how spatial distance (physical separation) and social distance (perceived dissimilarity) between auditors and SME clients influence audit quality, focusing on technical quality (the tangible outputs of auditing) and process quality (the manner of service delivery). Using data from 449 SME executives across Thailand, the study investigated the mediating role of auditor independence within these relationships. The results from structural equation modeling revealed that spatial distance has no direct impact on audit quality but a negative effect on perceived auditor independence, which, in turn, diminishes audit quality indirectly. Conversely, social distance negatively impacts both technical and process quality directly and indirectly through auditor independence. The findings suggest that despite technological advancements facilitating remote auditing, maintaining some physical interaction remains vital for preserving client trust. Additionally, aligning auditor–client social similarities significantly enhances audit quality perceptions. This study provides practical implications for audit firms in managing client interactions effectively, particularly within SMEs.