Audit Quality Indicators - Perceptions of Junior-Level Auditors

Managerial Auditing Journal
Audit quality indicators: perceptions of junior-level auditors

Veena L. Brown, Jodi L. Gissel, Daniel Gordon Neely,
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Audit quality indicators: Audit quality

indicators
perceptions of
junior-level auditors
Veena L. Brown 949
Accounting, University of Wisconsin Milwaukee, Milwaukee,
Wisconsin, USA
Jodi L. Gissel
Accounting, Marquette University, Milwaukee, Wisconsin, USA, and
Daniel Gordon Neely
University of Wisconsin Milwaukee, Milwaukee, Wisconsin, USA
Abstract
Purpose In an effort to develop an audit quality (AQ) framework specific to the US audit market, the
Public Company Accounting Oversight Board (PCAOB) recently issued a concept release proposing 28 audit
quality indicators (AQIs) along three dimensions: audit professionals, audit process and audit results. Using
AQIs initially proposed by the PCAOB, as well as AQIs suggested by prior literature, the authors solicit
perceptions from junior-level (senior and staff) auditors to investigate the current state of practice along
many of the AQIs relating to audit professionals and audit process.
Design/methodology/approach In the study, 78 junior-level auditors responded to the survey.
Findings An analysis of the responses suggests auditors engage in activities and audit firms
promote conditions that at times improve, and at other times, reduce audit quality. The authors find that
individual auditors perceptions differ across experience level, gender and audit firm size for certain
AQIs.
Practical implications The study is useful to the PCAOB because it provides insights to help
assess the value of potential AQIs in differentiating AQ. The study is also useful to other regulators
because it describes audit staff and seniors perceptions of apparent firm and auditor compliance
with accounting and auditing standards. Practitioners should find this information useful in
helping to identify possible root causes of audit deficiencies, a challenge put forth to firms by the
PCAOB.
Originality/value This study provides academia with evidence on AQ from practicing auditors,
which informs existing and future research along. The study complements existing work by
showing how individual auditor characteristics (experience and gender) at the junior levels may
impact AQ in practice
Keywords Experience, Audit quality, Audit deficiencies, Audit firm size, Audit quality indicators,
Auditors Perceptions
Paper type Research paper
1. Introduction Managerial Auditing Journal

This study provides evidence on the current state of practice for many audit quality Vol. 31 No. 8/9, 2016
pp. 949-980
indicators (AQIs) recently developed by the Public Company Accounting Oversight Emerald Group Publishing Limited
0268-6902
Board (PCAOB or Board, 2015a). Currently, a standardized audit quality (AQ) DOI 10.1108/MAJ-01-2016-1300
MAJ framework does not exist for US audit markets. Therefore, academia, practitioners and
31,8/9 others typically use the UKs Financial Reporting Councils (FRC) AQ framework as a
guide in measuring AQ (Johnstone et al., 2014)[1]. Developing a standard framework is
on the agenda of domestic and international regulators and standard setters (USA
Department of the Treasury, 2008; The Center for Audit Quality, 2012, 2013; PCAOB,
2013b, 2013c; International Auditing and Assurance Standards Board, 2013) and audit
950 firms (KPMG, 2011). An AQ framework, when appropriately used in an integrated audit,
offers many benefits to the public because it will provide comparative information about
audit firms with the intention of driving a more vibrant market for quality audit services
and help investors better evaluate the AQ associated with the financial statements of
current and potential investments (PCAOB, 2015a).
The PCAOB (2015a) recognizes the complexity of AQ and the need for a meaningful
set of AQIs to support an appropriate standardized AQ framework. Defining AQ solely
by audit failures or by relying on audit outcomes limits our ability to understand and
assess AQ (Francis, 2011). As part of its 2012-2016 strategic plan and goals to serve the
public interest, the Board is developing an AQ framework and has proposed examples of
AQIs in terms of audit professionals, audit process and audit results (PCAOB, 2013b,
2013c, 2015a). Without AQIs, it is challenging to assess AQ because of lack of
transparency in the audit process (PCAOB, 2015a, p. 3). The PCAOBs (2015a, p. 1)
concept release states AQIs may provide new insights about how to evaluate the
quality of audits and how high quality audits are achieved and may also stimulate
competition among audit firms focused on the quality of firms work and, thereby,
increase AQ overall. The implicit expectation is audit firms will vary on the AQ
dimensions. This is emphasized as the PCAOB (2015a, p. 3) further indicates the
promise of AQIs, in generating insights into the foundations of AQ, both within and
among firms and in creating incentives for competition in quality, is considerable.
Our study seeks to gain an understanding of whether there is significant variation in
measures that influence AQ by soliciting auditors perceptions of the current state of
practice for proposed AQIs. We draw from the PCAOBs (2013a, 2013d, 2015a) proposed
AQIs, under the assumption the proposed AQIs are measures of high quality and from
prior literature, relating to job performance and drivers of AQ, to identify other
measures that influence AQ. If auditors perceptions suggest low AQ or reveal
significant variations between groups, this may suggest the measures are informative in
differentiating and evaluating AQ. However, if there is not a significant variation and
responses suggest already high levels of AQ for the measures, this may imply using the
measures because AQIs will not stimulate competition among firms and thus will not
increase AQ, as suggested by the PCAOB.
A recent study solicits the views of investors and upper-level auditors (partners and
senior-managers), providing varying perspectives on AQ and evaluating many AQIs
proposed by the PCAOB (Christensen et al., 2015). Our study complements and extends
this work by assessing junior-level auditors perceptions on selected AQIs[2]. We target
junior-level auditors to address our research questions for the following reasons. First,
junior-level auditors perform the majority of audit procedures that define AQ and
provide the foundation for other procedures and processes affecting AQ[3]. Second,
individual auditor and audit team activities (e.g. testing controls) are distinct from audit
activities at the firm level (e.g. providing training), making it important to understand
how junior-level auditors contribute to AQ and what they believe audit firms do to
contribute to AQ. Third, junior-level auditors are less likely to provide opinions to the Audit quality
PCAOB when the Board solicits public comments, but their perspectives may be indicators
valuable to the PCAOB and other audit standard setters. Many of the AQIs in the
proposed AQ framework [such as work enjoyment, appreciation by supervisors,
knowledge of generally accepted auditing standards (GAAS) and generally accepted
accounting principles (GAAP)] directly affect the work performed by junior-level
auditors. As such, this study is useful because it provides the perceptions of junior-level 951
auditors on the current state of practice for AQIs. We solicit auditors perceptions
through an anonymous online survey to address the following research questions:
RQ1. What are auditors perceptions of the current state of practice relating to
audit professionals AQIs?
RQ2. What are auditors perceptions of the current state of practice relating to
audit process AQIs?
We present analyses of the perceptions of 78 junior-level auditors as a full sample and

also separately along three dimensions (experience level, gender and audit firm size) that
prior research suggests influence AQ. Overall, we find respondents generally enjoy their
work and feel their firms and supervisors support them. Respondents express
confidence in their abilities and generally agree they are knowledgeable about
accounting and auditing standards. Respondents feel their firms promote high-quality
audits through training and supportive environments. However, respondents report a
high degree of multitasking, distractions during the audit process, lack of knowledge of
international financial reporting standards (IFRS) and international auditing standards
and firm reliance on work by outsiders that are not specialists[4]. Collectively, these
items can lower AQ if not appropriately addressed.
Our findings make several contributions. Our study provides confirmatory evidence
on the current state of practice for the PCAOBs AQIs, which may be useful in
developing the AQ framework. Specifically, we highlight areas of focus where audit
professionals or audit process may increase or decrease AQ and provide insight as to the
usefulness of potential AQIs in terms of differentiating AQ. The study is also useful to
other regulators, such as the Securities and Exchange Commission (SEC), Financial
Accounting Standards Board (FASB) and American Institute of Certified Public
Accountants (AICPA) because it describes audit staff and seniors perceptions of
apparent firm and auditor compliance with accounting and auditing standards.
Practitioners may find this information useful in helping to identify possible root causes
of audit deficiencies, a challenge put forth to firms by the PCAOB (2012a, 2012b, 2012c).
Additionally, results from this study can help firms improve AQ by addressing
concerns raised through overall findings, as well as consider implications of experience
level, gender and audit firm size differences. An increase in AQ should lead to fewer
financial statement misstatements and undetected internal control weaknesses related
to financial reporting, which is favorable for all stakeholders.
We also contribute to the AQ literature. This study answers calls for more research
considering the relation between individual auditor characteristics (experience and
gender) and AQ (Francis, 2011). This study also provides academia with evidence on AQ
from practicing auditors, which informs existing and future research along with the
potential for curriculum adjustments. Christensen et al. (2015) find upper-level auditors
define a lack of AQ in terms of failure to comply with GAAS, whereas investors define
MAJ AQ in terms of individual auditor competence. However, auditors and investors agree
31,8/9 that auditor characteristics are a key determinant of AQ (Christensen et al., 2015). Our
study complements this work by showing how individual auditor characteristics
(experience and gender) at the junior levels may impact AQ in practice.
The next section provides background and basis for this study. Section 3 describes
methodology, including participants and survey development. Section 4 presents and
952 discusses results. We conclude with a summary of findings, study limitations and
suggestions for future research.
2. Background and literature review

While the PCAOB (2012a, 2012b, 2012c, 2013a) recognizes a decline in the overall
number and severity of audit deficiencies over the past decade, concerns remain over
recurring deficiencies relating to lack of technical competence or due professional care,
ineffective or insufficient supervision, ineffective engagement quality reviews and other
factors. These are not new issues. Research investigating SEC enforcement actions
spanning the past several decades (Campbell and Parker 1992; Beasley et al., 2001, 2013)
reveals similar concerns, documenting issues with technical competence (16 per cent),
due professional care (67-71 per cent), planning and supervision (56 per cent), sufficient
competent evidential matter (73-83 per cent), professional skepticism (60 per cent) and
interpreting or applying GAAP requirements (49 per cent). These research findings
highlight the importance of identifying AQIs and support the PCAOBs goal to develop
an AQ framework to measure and improve AQ.
2.1 Audit quality framework

The PCAOB (2015a) recently released an AQ framework with three elements audit
professionals, audit process and audit results. The framework incorporates segments
identified by recent academic literature and contains elements similar to the FRCs AQ
framework in the UK (Knechel et al., 2013). Early versions of the framework (PCAOB
2013b) started with over 70 AQIs and was subsequently reduced to 40 AQIs, presented
in terms of inputs (e.g. workloads, experience, training), process (e.g. tone at the top,
information and communication, personnel management) and results (e.g. financial
statements and disclosures, going concern warnings, audit committee communications).
The current version of the AQ framework (PCAOB 2015a), released on July 1, 2015,
presents 28 AQIs in terms of audit professionals, audit process and audit results.
2.2 Audit quality indicators

In contemplating an AQ framework, the PCAOB (2015a, p. 13) suggests several AQIs to
measure each element of the framework:
Audit professionals: staffing leverage; partner workload; manager and staff
workload; technical accounting and auditing resources; persons with specialized
skill and knowledge; experience of audit personnel; industry expertise of audit
personnel; turnover of audit personnel; amount of audit work centralized at
service centers; training hours per audit professional; audit hours and risk areas;
and allocation of audit hours to phases of the audit;
Audit process: results of independent survey of firm personnel; quality ratings
and compensation; audit fees, effort, and client risk; compliance with independent
requirements; investment in infrastructure supporting quality auditing; audit
firms internal quality review results; PCAOB inspection results; and technical Audit quality
competency testing; and indicators
Audit results: frequency and impact of financial statement restatement for errors;
fraud and other financial reporting misconduct; inferring AQ from measures of
financial reporting quality; timely reporting of internal control weaknesses;
timely reporting of going concern issues; results of independent surveys of audit
committee members; trends in PCAOB and SEC enforcement proceedings; and 953
trends in private litigation.
However, the PCAOB seeks to affirm its suggestions and identify other potential AQIs.
Our study provides insight for this evaluation and consideration of alternative AQIs.
Academic literature also offers suggestions on varying, and at times conflicting, AQI
constructs. A long history of organizational psychology literature examines job
satisfaction and performance and, overall, indicates a positive relation between the two;
however, there is variation in findings (Judge et al., 2001; Bowling et al., 2015). Bowling
et al. (2015, p. 95) present evidence suggesting that job satisfaction is a positive predictor
of performance when employees have a fair amount of discretion in deciding how to
perform their work but not necessarily a predictor in situations when employees lack
this discretion. Examples of occupations with high (low) levels of discretion are Police
Detectives (Machine Operators), considering the need for analytical and
problem-solving skills and creative thinking (Bowling et al., 2015). Thus, there is a
stronger likelihood job satisfaction that relates positively to performance for auditors.
Similarly, prior research suggests auditors dissatisfied with working conditions or
workload may engage in actions that reduce AQ (Alderman and Deitrick, 1982; McNair,
1991; Herrbach, 2001; Christensen et al., 2015). Anecdotal evidence indicates that intense
workload during the busy season is a major contributor to auditor stress and high
turnover rates in public accounting (Shellenbarger, 1998). Increased workload during
busy season is directly related to job burnout (Sweeney and Summers, 2002) and high
turnover rates (Fogarty and Uliss, 2000).
While the PCAOB proposes AQIs relating to workload, the recommendations do not
extend to concerns stemming from the fact that auditors often work on multiple
engagements or tasks simultaneously. Working on multiple tasks and clients
simultaneously or during the same work session affects AQ because it can cause
auditors to make certain information-processing and memory-related errors
(Bhattacharjee et al., 2013). Research shows that working on multiple tasks for the same
client can create a halo effect that affects auditors subsequent unrelated judgments
(Nisbett and Wilson, 1977; Murphy et al., 1993; Finucane et al., 2000; ODonnell and
Schultz, 2005). Working on multiple clients may cause memory-conjunction errors,
which can adversely affect AQ. Lindberg and Maletta (2003) document that auditors
may incorrectly associate positive (negative) audit evidence from one client to a
subsequent client and reduce (increase) audit work because of an unwarranted more
(less) favorable impression of the second client. Working on multiple clients can also
result in auditors using contrast effects, that is, using similar information from a
previous task as a basis against which to compare information for the current task.
Research shows that contrast effects negatively impact auditor decision-making
processes in a multiple-client audit setting (Bhattacharjee et al., 2007) because the
MAJ outcome of the evaluation of the information is dependent on how the information
31,8/9 compares to the prior task (Manis et al., 1988; Higgins, 1996).
The PCAOB (2015a) also seeks to include AQIs relating to tone at the top and
leadership. Extant research suggests that organizational communication also relates to
job performance. Pincus (1986) finds that supervisor communication (i.e. openness and
willingness to listen to and guide subordinates) and communication climate (i.e. general
954 organizational-level communication environment, including timeliness of information)
each have a significant positive correlation with performance. A recent study ties these
concepts together and reports that management communication influences employees
perceptions of organizational support, giving employees a sense of value and
contribution to the organization, which increases employees performance (Neves and
Eisenberger, 2012). Malone and Roberts (1996) find firm quality control and review
procedures, and individuals perceptions of the strength of these factors relate
negatively with behaviors that reduce AQ, providing additional potential AQIs.
Francis (2011) notes that a key level of analysis is the inputs to the audit process.
Specifically, the quality of the audit varies by the relative competence of the people
performing the audits. Academic literature finds that AQ varies by several factors,
including gender, experience level of the audit staff and firm size (Chung and Monroe,
2001; Gul et al., 2013; Bobek et al., 2015); therefore, our analysis evaluates our findings
through the lens of each of these factors. Specifically, Chung and Monroe (2001) find that
females are more accurate decision-makers in complex decision tasks, and Bobek et al.
(2015) find that decision-making varies by gender. Gul et al. (2013) find that individual
auditors at higher ranks and auditors with Big 4 audit firm experience are relatively
more conservative. Christensen et al. (2015) capture the views of auditors at higher ranks
(partners and senior-managers) but does not consider junior-level auditors. Our study
provides the perceptions of junior-level auditors the group with, arguably, the greatest
impact on audit inputs and processes on the current state of practice relating to some
of the PCAOBs AQIs. Additionally, we categorize the results of the study along the
dimensions of experience level, gender and firm size to capture variances and
similarities of the auditors perceptions, which informs the auditing literature. The next
section describes the methodology.
3. Methodology
To address our research questions and to gain insight into AQIs, we solicit auditors
perceptions through an anonymous online survey[5]. We distributed the survey to 344
auditors at public accounting firms, primarily in the Midwest region of the USA[6]. In
total 154 participants accessed the online survey. Of these, we exclude 19 participants
who did not respond to a single item and 36 participants who started, but did not
complete, the survey[7]; 99 participants completed the survey (29 per cent response
rate)[8]. As our study focuses on junior-level auditors perceptions, we exclude 21
responses from individuals who did not identify their rank as junior-level. Table I
provides demographics for our final sample of 78 participants.
In all, 46 staff and 32 seniors responded to our survey (37 males, 40 females)[9].
Participants representing the Big 4 were 61, and 17 participants represented non-Big 4
audit firms[10]; 43 respondents note a Certified Public Accountant (CPA) designation. In
terms of service experience by client type, 62 participants have experience auditing
public companies (39 claim expertise), and 65 participants have experience auditing
private companies (28 claim expertise); 51 participants have audited other client types Audit quality
(e.g. not-for-profit or government units), but only four claim expertise in these areas. indicators
A majority of participants note manufacturing engagement experience (62 respondents)
and specialization (26 respondents). This is reasonable because most participants work
for audit firms located in the Midwest USA, where there is a predominance of
manufacturing firms. Participants report the next two most prevalent industries as
finance or insurance (36 with engagement experience and 14 specializing) and health 955
care or social assistance (29 with engagement experience and three specializing).
3.1 Survey instrument

Drawing from the PCAOBs (2013b) list of AQIs and prior literature, we develop and
administer an online survey relating to AQIs for which staff and senior level auditors
Panel A: Auditor professionals
Rank Audit firm size

Staff 46 (59%) Big 4 61 (78%)
Senior 32 (41%) Non-big 4 17 (22%)
Education Professional designations
Masters degree 34 (43%) CPA 43 (55%)
Four-year college degree 42 (54%) CMA 2 (3%)
Some college 2 (3%) CFE 1 (1%)
Gendera Age
Male 37 (47%) 18-34 76 (97%)
Female 40 (52%) 35 and over 2 (3%)
Panel B: Auditor experience
Experience by client type Public (%) Private (%) Other (%)

Audit experience 62 (80) 65 (83) 51 (65)
Claim expertise 39 (50) 28 (36) 4 (5)
Industry experienceb Conduct engagements (%) Specialize (%)

Manufacturing 62 (80) 26 (33)
Finance or insurance 36 (46) 14 (18)
Health care or social assistance 29 (37) 3 (4)
Retail trade 20 (26) 6 (8)
Utilities 16 (21) 5 (6)
Wholesale trade 15 (19) 5 (6)
Otherc 66 (85) 10 (13)
Notes: a One participant chose to not respond; b percentages add up to more than 100% because
respondents may choose more than one category; c other industries include arts, entertainment or
recreation; construction; information; mining; real estate or rental and leasing; transportation or
warehousing; various services, support or consulting (except public administration); and other. Less
than 15% of participants indicate they conduct engagements in each of these industry categories Table I.
individually Demographics
MAJ should have relevant knowledge. The survey instrument addresses the PCAOBs
31,8/9 elements of audit professionals and audit process. Examples of survey items relating to
the audit professionals category include knowledge of and confidence in ability to apply
accounting and auditing standards and how often auditors feel time-pressured.
Examples of process-related survey items include superiors commitment to quality of
audit work, adequacy of the engagement review process, consultation with superiors,
956 reasonableness of required work hours and workloads, level of auditor turnover and
frequency in which audit work is outsourced to specialists or non-specialists[11]. Based
on prior literature (Bonner, 1990; Griffin and Ricchiute, 2011), we also included items
addressing audit team and audit firm effectiveness. Examples include confidence in
performing technical auditing tasks and firms commitment to risk assessment and AQ.
To better understand the commonalities in the data, we developed AQ constructs
within the PCAOB audit professionals and audit process elements by coding survey
items into one of the following six categories:

(1) auditor mood or affect;
(2) auditor knowledge and confidence;
(3) individual auditor activity;
(4) audit team activity;
(5) audit firm environment; or
(6) audit firm activity.
An alternative approach to categorization is exploratory factor analysis (EFA). We do

not use EFA because our data set is not appropriate for this statistical method. Our
sample size falls below the recommended 150 cases, and our ratio of participants to
survey items falls below the sufficient level of 5:1 (Pallant, 2013). Further, many of our
items are on a five-point ordinal scale, which is inappropriate for traditional EFA
(Nunnally and Bernstein, 1994). Two independent coders and two authors individually
coded each survey item into one of the six categories[12]. Next, we aggregated the four
coders results and assigned an item to the category most frequently selected by the
coders. In cases of a tie (where two coders selected one category and two coders selected
another), a third author broke the tie by assigning the item to one of the two categories.
Figure 1 presents our theoretical model illustrating how AQIs suggested by prior
literature relate to our AQ constructs, within the relevant PCAOB AQ framework
elements for our study.
4. Discussion of results
In this section, we present and discuss survey results for RQ1 and RQ2 in terms of our
six AQ constructs. Two constructs (auditor mood or affect, auditor knowledge and
confidence) relate to the audit professionals element, whereas the remaining constructs
(individual auditor activity, audit team activity, audit firm environment, audit firm
activity) relate to the audit process element. We assess median responses for our full
sample, as well as consider differences by rank (staff versus senior), gender and audit
firm size (Big 4 versus non-Big 4)[13].
Audit quality
indicators
957
Figure 1.
Theoretical model of
our audit quality
construct
4.1 Auditor mood or affect

Table II presents findings for items relating to auditor mood or affect. Participants
report that they enjoy their jobs (median 4), are not bored most of the time (median
2) and feel accomplished and appreciated by superiors (medians 4)[14]. These results
are encouraging because prior literature finds that job satisfaction is a positive predictor
of performance in occupations where the employee has some discretion in performing
their work (Bowling et al., 2015), and auditors do have discretion in performing their
work. Participants indicate they feel overworked (median 4) and often feel
time-pressured (median 4 on scale of 1 rarely to 5 always). These items can have either
a positive or negative effect on AQ because some auditors perform better under pressure
(DeZoort and Lord 1997). However, Sweeney and Summers (2002) find that increased
workloads can lead to job burnout. Prior literature finds burnout predicts increased
turnover intention, poor job performance and lower levels of job satisfaction (Jones et al.,
2010). There are no statistically significant differences in auditor mood or affect items
based on rank, gender or firm size. Overall, our results suggest that auditors have a
positive mood or affect relating to their jobs, which should improve AQ. We next
consider items relating to auditor knowledge and confidence.
4.2 Auditor knowledge and confidence

Table III presents findings for items relating to auditor knowledge and confidence[15].
Auditor confidence has been shown to influence auditor judgment, whereas technical
knowledge has been found to be more important than managerial knowledge in
explaining AQ (Chung and Monroe, 2000; Ernstberger et al., 2015).
Respondents report a relatively high level of knowledge of US GAAP (median 4) and,
although they express only moderate knowledge of AICPA and PCAOB standards
(medians 3), indicate high confidence in their ability to apply AICPA and PCAOB
standards (medians 4). Participants also express confidence in their ability to collect
affecta
958
MAJ
31,8/9
Table II.
Auditor mood or
Full Rank Gender Audit firm size
Non-Big
SAMPLE Staff Seniors Male Female Big 4 4
Median Median Median Median Median Median Median
b
Survey item (Range) (Range) (Range) Z p (Range) (Range) Z p (Range) (Range) Z p
I feel
overworked 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 0.554 0.579 4.00 (2-5) 4.00 (2-5) 0.430 0.667 4.00 (2-5) 4.00 (2-5) 0.596 0.551
I enjoy my job 4.00 (1-5) 4.00 (1-5) 4.00 (2-5) 0.650 0.516 4.00 (3-5) 4.00 (1-5) 0.295 0.768 4.00 (1-5) 4.00 (3-5) 1.197 0.231
I am bored
most of the
time 2.00 (1-5) 2.00 (1-5) 2.00 (1-4) 0.310 0.756 2.00 (1-5) 2.00 (1-4) 0.811 0.417 2.00 (1-5) 2.00 (1-3) 0.073 0.942
I feel
accomplished 4.00 (2-5) 4.00 (2-5) 4.00 (3-5) 1.284 0.199 4.00 (2-5) 4.00 (2-5) 0.938 0.348 4.00 (2-5) 4.00 (3-5) 0.713 0.476
I feel
appreciated
by my
superiors 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 1.012 0.312 4.00 (2-5) 4.00 (2-5) 0.665 0.506 4.00 (2-5) 4.00 (2-5) 0.189 0.850
How often feel
time-pressuredc 4.00 (2-5) 4.00 (2-5) 3.00 (2-4) 1.577 0.115 4.00 (2-5) 3.00 (2-5) 1.041 0.298 4.00 (2-5) 3.00 (3-4) 0.056 0.955
Notes: a We use Mann-Whitney U tests to compare staff (N 46) versus seniors (N 32), male (N 37) versus female (N 40) and Big 4 firms (N 61) versus non-Big 4 firms (N 17).
One participant chose not to provide gender. N are as we indicate in parentheses, unless we note otherwise. All p-values are two-tailed, and p-values equal to or less than 0.100 are significant;
there are no statistically significant differences in auditor mood or affect items based on rank, gender, or firm size; b unless we note otherwise, participants rate items on level of agreement
with each statement on a scale of 1 (strongly disagree) to 5 (strongly agree); c participants rate on a scale of 1 (rarely) to 5 (always). N 62, staff N 36, seniors N 26, male N 31, female
N 30, Big 4 N 49, non-Big 4 N 13

Non-
Sample Staff Seniors Male Female Big 4 Big 4
Survey itemb (Range) (Range) (Range) Z p (Range) (Range) Z p (Range) (Range) Z p
I am more
knowledgeable than
my superior on many
audit issues 2.00 (1-4) 2.00 (1-4) 2.00 (1-4) 1.518 0.129 2.00 (1-4) 2.00 (1-4) 0.099 0.921 2.00 (1-4) 2.00 (1-2) 1.402 0.161
c
Knowledge of:
US GAAP 4.00 (2-5) 4.00 (2-5) 4.00 (3-5) 0.978 0.328 4.00 (3-5) 4.00 (3-5) 1.364 0.173 4.00 (2-5) 4.00 (3-5) 0.257 0.798
IFRS 2.50 (1-4) 3.00 (1-4) 2.00 (1-4) 2.692 0.007 3.00 (1-4) 2.00 (1-4) 0.970 0.332 3.00 (1-4) 2.00 (1-4) 1.231 0.218
PCAOB standards 3.00 (1-4) 3.00 (1-4) 3.00 (1-4) 0.900 0.368 3.00 (1-4) 3.00 (1-4) 0.519 0.604 4.00 (1-4) 2.00 (1-4) 4.248 0.000
AICPA standards 3.00 (1-4) 3.00 (1-4) 4.00 (2-4) 2.335 0.020 3.00 (2-4) 3.00 (2-4) 0.559 0.576 3.00 (1-4) 3.00 (2-4) 0.588 0.556
International auditing
standards 2.00 (1-4) 3.00 (1-4) 2.00 (1-4) 2.603 0.009 2.00 (1-4) 2.00 (1-3) 0.414 0.679 2.00 (1-4) 2.00 (1-3) 0.932 0.351
d
Confidence in ability to:
Apply AICPA auditing
standards 4.00 (1-5) 4.00 (1-5) 4.00 (2-5) 2.330 0.020e 4.00 (2-5) 4.00 (1-5) 1.130 0.259 4.00 (1-5) 4.00 (2-4) 0.300 0.764
Apply PCAOB
auditing standards 4.00 (1-5) 4.00 (1-5) 4.00 (1-5) 0.038 0.969 4.00 (1-5) 4.00 (1-5) 0.600 0.548 4.00 (1-5) 3.00 (1-4) 3.473 0.001
Apply IAASB auditing
standards 3.00 (1-4) 3.00 (1-4) 2.00 (1-4) 2.197 0.028 3.00 (1-4) 3.00 (1-4) 0.123 0.902 3.00 (1-4) 3.00 (1-4) 0.127 0.899
Recognize GAAP
misstatements 4.00 (1-5) 4.00 (1-5) 4.00 (3-5) 1.552 0.121 4.00 (2-5) 4.00 (1-5) 1.178 0.239 4.00 (1-5) 4.00 (2-5) 0.837 0.402

Recognize IFRS
misstatements 3.00 (1-4) 3.00 (1-4) 3.00 (1-4) 1.365 0.172 3.00 (1-4) 3.00 (1-4) 1.425 0.154 3.00 (1-4) 3.00 (1-4) 0.572 0.568
Apply correct
procedure to test
management
assertions 4.00 (1-5) 4.00 (1-5) 4.00 (3-5) 3.338 0.001a 4.00 (1-5) 4.00 (1-5) 0.295 0.768 4.00 (1-5) 4.00 (1-5) 0.837 0.402
(continued)
Table III.
959
and confidenceaa
indicators
Audit quality
Auditor knowledge
960
MAJ
31,8/9
Table III.
Non-
Adequately gather
sufficient,
appropriate audit
evidence 4.00 (3-5) 4.00 (3-5) 5.00 (4-5) 3.797 0.000 4.00 (3-5) 4.00 (4-5) 1.433 0.152 4.00 (3-5) 4.00 (4-5) 0.729 0.466
Adequately assess
need for
corroborative
evidence 4.00 (2-5) 4.00 (2-5) 5.00 (3-5) 2.882 0.004 4.00 (2-5) 4.00 (2-5) 0.843 0.399 4.00 (2-5) 4.00 (3-5) 0.781 0.435
Adequately
understand clients
internal controls 4.00 (2-5) 4.00 (2-5) 4.00 (3-5) 1.978 0.048b 4.00 (2-5) 4.00 (2-5) 2.239 0.025g 4.00 (2-5) 4.00 (2-5) 2.521 0.012g
Adequately
document events or
processes (e.g.
memo, flowchart) 4.00 (1-5) 4.00 (1-5) 4.00 (2-5) 1.284 0.199 4.00 (1-5) 4.00 (2-5) 2.290 0.022c 4.00 (2-5) 4.00 (1-5) 0.007 0.995
Adequately test
effectiveness of
internal controls 4.00 (1-5) 4.00 (1-5) 4.00 (2-5) 1.881 0.060d 4.00 (1-5) 4.00 (1-5) 1.241 0.215 4.00 (2-5) 4.00 (1-5) 2.248 0.025i
Adequately apply
professional
skepticism 4.00 (3-5) 4.00 (3-5) 5.00 (3-5) 1.666 0.096 4.00 (3-5) 4.00 (3-5) 0.193 0.847 4.00 (3-5) 4.00 (3-5) 1.378 0.168
Adequately
interview audit
clients 4.00 (1-5) 4.00 (1-5) 5.00 (4-5) 2.831 0.005 4.00 (2-5) 4.00 (1-5) 1.029 0.303 4.00 (2-5) 4.00 (1-5) 1.612 0.107
Adequately identify
risk factors 4.00 (1-5) 4.00 (1-5) 4.00 (3-5) 2.813 0.005e 4.00 (2-5) 4.00 (1-5) 1.155 0.248 4.00 (2-5) 4.00 (1-5) 0.995 0.320
Adequately respond
f
to risks 4.00 (1-5) 4.00 (1-5) 4.00 (4-5) 3.655 0.000 4.00 (2-5) 4.00 (1-5) 1.508 0.132 4.00 (2-5) 4.00 (1-5) 0.945 0.344
(continued)

Non-

Adequately
recognize material
misstatements due
to errors 4.00 (2-5) 4.00 (2-5) 4.00 (4-5) 3.679 0.000a 4.00 (3-5) 4.00 (2-5) 0.811 0.417 4.00 (2-5) 4.00 (3-5) 0.848 0.397
Adequately
recognize material
misstatements
because of fraud 4.00 (1-5) 3.00 (1-5) 4.00 (2-5) 2.873 0.004 4.00 (2-5) 4.00 (1-5) 0.225 0.822 4.00 (2-5) 3.00 (1-5) 1.211 0.226
Adequately
communicate with
superiors 4.50 (3-5) 4.00 (3-5) 5.00 (4-5) 2.387 0.017 4.00 (3-5) 5.00 (4-5) 0.785 0.433 5.00 (3-5) 4.00 (4-5) 0.145 0.885
Notes: aa We use Mann-Whitney U tests to compare staff (N 46) versus seniors (N 32), male (N 37) versus female (N 40) and Big 4 firms (N 61) versus non-Big 4 firms (N
17). One participant chose not to provide gender. N are as we indicate in parentheses, unless we note otherwise. All p-values are two-tailed, and p-values equal to or less than 0.100 are italic.
If medians are equal but there is a statistically significant difference, we present means in a footnote to give insight as to directional implications (see footnotes e, f, g, h, i, j, k and l); a staff
(seniors) mean is 3.91 (4.47); b unless we note otherwise, participants rate items on level of agreement with each statement on a scale of 1 (strongly disagree) to 5 (strongly
agree); c participants rate on a scale of 1 (no knowledge) to 5 (expert knowledge); d participants rate on a scale of 1 (not at all confident) to 5 (extremely confident); e staff (seniors) mean is
3.63 (4.06); a staff (seniors) mean is 3.72 (4.34); bstaff (seniors) mean is 3.85 (4.22). Male (female) mean is 3.84 (4.18). Big 4 (non-Big 4) mean is 4.11 (3.59); cmale (female) mean is 3.73
(4.18); dstaff (seniors) mean is 3.76 (4.16). Big 4 (non-Big 4) mean is 4.07 (3.41); estaff (seniors) mean is 3.67 (4.16); f staff (seniors) mean is 3.67 (4.28)
Table III.
961
indicators
Audit quality
MAJ evidence, recognize misstatements, apply correct audit procedures, understand and test the
31,8/9 effectiveness of internal controls, document events and processes, identify and respond to
risk factors, interview clients and apply appropriate professional skepticism (medians 4).
Respondents indicate a relative lack of knowledge of IFRS (median 2.5) and
international auditing standards (median 2) but moderate confidence in applying
international auditing and assurance standards board (IAASB) standards and
962 recognizing IFRS misstatements (medians 3). This suggests less confidence relating
to international compared with domestic standards. This is logical though because our
participants primarily have domestic audit experience[16]. Interestingly, results
indicate that respondents have more confidence in their ability to apply both
international and domestic standards than in their knowledge of the standards
themselves. This may be in part because of their ability to research standards, as
applicable, prior to applying a standard.
Overall, participants appear confident and feel they are knowledgeable in most areas,
though the lack of knowledge and confidence in some areas can negatively impact AQ.
Results show that participants do not appear overconfident in their knowledge level:
they disagree they are more knowledgeable than superiors on many audit issues
(median 2) and are confident in their ability to communicate with superiors (median
4.50)[17].
In comparing staff to seniors, as noted in Table III, we find several notable differences
in responses. Staff auditors express a higher level of agreement than seniors for
knowledge of IFRS and international auditing standards (staff medians 3, seniors
medians 2) while expressing a lower level of agreement for knowledge of AICPA
standards (staff median 3, seniors median 4). Both seniors and staff express lack of
confidence in applying international auditing standards, with staff relatively more
confident (median 3) than seniors (median 2). Seniors and staff express similar
levels of confidence in applying PCAOB and AICPA standards (medians 4). As we
might expect, seniors express more confidence in their ability to perform auditing
procedures. For example, seniors are more confident in their ability to gather evidence,
assess need for corroborative evidence, apply professional skepticism and interview
audit clients (seniors medians 5, staff medians 4). Seniors are also more confident in
their ability to communicate with superiors (seniors median 5, staff median 4).
With two notable exceptions, we find no significant differences with respect to firm
size and gender regarding knowledge of standards, confidence in applying standards or
confidence in performing auditing procedures. Participants from Big 4 firms agree more
than non-Big 4 respondents to having knowledge of PCAOB standards (Big 4 median
4, non-Big 4 median 2) and confidence in applying those standards (Big 4 median
4, non-Big 4 median 3). This is reasonable because Big 4 firms have a much larger
share of the audit market of publicly traded companies and thus more exposure to
PCAOB standards.
Overall, our results suggest auditors have more confidence in their knowledge and
ability to apply US standards and procedures than international standards. Seniors, in
particular, express low level of agreement for knowledge of international standards.
This is likely because of international standards only recently receiving more attention
in college curricula. In addition to internal factors such as mood or affect and knowledge
and confidence, auditors can individually engage in activities that promote or reduce
AQ. We next examine individual auditor activity under RQ2 relating to the PCAOBs Audit quality
audit process element. indicators
4.3 Individual auditor activity

Table IV summarizes findings for items relating to individual auditor activity.
Participants indicate continuing professional education courses are synergetic with 963
their duties for both themselves and their colleagues (medians 4)[18]. Taken in
conjunction with the generally low agreement for knowledge of accounting and auditing
standards, this finding suggests that auditors receive focused training for their
particular clientele and not on the broader set of accounting and auditing standards.
Participants generally agree they often consult with superiors (median 4.5) and agree
less that they consult with peers more than superiors on difficult audit issues (median
3). This is a positive indicator of AQ and suggests junior-level auditors feel comfortable
discussing audit issues with superiors.
Conversely, some auditor activities contribute to low AQ. Auditors report working
concurrently on multiple engagements (median 2) and multiple audit-related tasks
(median 4)[19]. Participants report spending the majority of their time on more than
one engagement (median 75 per cent), on more than one audit-related task at a time
(median 88.5 per cent) and switching between audit-related activities in a typical work
hour (median 75 per cent). Auditors also experience self-imposed interruptions
approximately one-third of the time (median 36 per cent). Multi-tasking is of
particular concern because prior research finds multi-tasking impairs judgement and
leads to auditor errors (Lindberg and Maletta, 2003; Bhattacharjee et al., 2013).
Significant differences exist between audit staff and seniors on per cent of time they
participate in more than one engagement at a time (median 67 per cent versus 75.5 per
cent, respectively), participate in more than one audit-related task at a time (median
78.5 per cent versus 95.5 per cent, respectively), switch between audit-related activities
in a typical work hour (median 75 per cent versus 77 per cent, respectively) and work
remotely from home (median 34.5 per cent versus 50 per cent, respectively). These
differences suggest seniors are utilized at a higher rate on multiple engagements and
tasks than staff. Increases in responsibilities for seniors likely contribute to these
differences.
Interestingly, individual auditor activity responses did not vary by gender. However,
we detect significant differences by firm size. Respondents from non-Big 4 firms report
they work on more audit engagements concurrently than Big 4 participants report
(median 3 versus 2, respectively). Non-Big 4 respondents also report spending a
greater percentage of their time on more than one concurrent engagement (median 89
per cent versus 75 per cent) and working remotely from home more often (median 51
per cent versus 38 per cent). Overall, comparison of responses by firm size suggests
non-Big 4 auditors work on smaller audit clients, requiring a greater deal of
multitasking and flexibility. This higher level of multitasking can negatively impact AQ
if not properly managed.
While individual auditor activity is important, auditors spend most of their time
working with an audit team. Therefore, we next examine audit team activity AQIs.
964
MAJ
activitya
31,8/9
Table IV.
Individual auditor
Non-Big
Sample Staff Seniors Male Female Big 4 4
b
CPE courses I take

are synergetic
with my dutiesc 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 2.511 0.012d 4.00 (2-5) 4.00 (2-5) 1.479 0.139 4.00 (2-5) 4.00 (3-5) 0.398 0.690
CPE courses my
colleagues take are
synergetic with
their dutiesc 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 1.099 0.272 4.00 (2-5) 4.00 (2-5) 0.776 0.438 4.00 (2-5) 4.00 (3-5) 0.056 0.955
I often consult
with my superior
on difficult audit
issues 4.50 (2-5) 4.00 (2-5) 5.00 (3-5) 0.846 0.398 5.00 (3-5) 4.00 (2-5) 0.320 0.749 5.00 (3-5) 4.00 (2-5) 0.421 0.674
I consult with my
peers more than
my superior on
difficult audit
issues 3.00 (1-5) 3.00 (2-5) 3.00 (1-5) 1.345 0.179 3.00 (1-5) 3.00 (2-5) 0.229 0.819 3.00 (1-5) 3.00 (2-4) 0.634 0.526
Number of audit
engagements I
work on
concurrentlye 2.00 (1-5) 2.00 (1-5) 3.00 (1-5) 0.931 0.352 3.00 (1-5) 2.00 (1-5) 0.037 0.970 2.00 (1-5) 3.00 (1-5) 2.521 0.012
Number of audit-
related tasks I
work on
concurrentlyf 4.00 (1-5) 3.00 (1-5) 4.00 (1-5) 2.028 0.043 4.00 (2-5) 4.00 (1-5) 0.428 0.669 4.00 (1-5) 4.00 (1-5) 0.317 0.751
Percent of time:g
Participate in more
than one
engagement at a
time 75.00 (5-100) 67.00 (5-100) 75.50 (5-100) 1.656 0.098 75.00 (5-100) 75.00 (21-100) 0.501 0.616 75.00 (5-100) 89.00 (24-100) 1.961 0.050
Participate in more
than one audit-
related task at a
time 88.50 (31-100) 78.50 (31-100) 95.50 (59-100) 2.988 0.003 89.00 (31-100) 88.00 (50-100) 0.517 0.605 89.00 (31-100) 87.00 (50-100) 0.798 0.425
(continued)

Non-Big
Sample Staff Seniors Male Female Big 4 4
b
Percent of time:
Switch between audit-
related activities in
typical work hour 75.00 (0-100) 75.00 (0-100) 77.00 (38-100) 1.647 0.100 75.00 (12-100) 75.50 (0-100) 0.977 0.328 75.00 (12-100) 75.00 (0-99) 0.395 0.693
Work remotely (from
home or alternative
location) 49.50 (2-100) 34.50 (2-100) 50.00 (7-100) 1.802 0.072 50.00 (2-100) 41.50 (3-97) 1.025 0.305 38.00 (2-100) 51.00 (2-98) 2.001 0.045
Experience self-
imposed interruptions
(phone calls, check
e-mails) 36.00 (2-91) 35.00 (8-91) 39.50 (2-78) 0.463 0.643 41.00 (8-86) 35.00 (2-91) 0.072 0.943 35.00 (8-91) 38.00 (2-90) 1.012 0.311
Notes: a We use MannWhitney U tests to compare staff (N 46) versus seniors (N 32), male (N 37) versus female (N 40) and Big 4 firms (N 61) versus non-Big 4 firms (N 17). One participant chose not to
provide gender. N are as we indicate in parentheses, unless we note otherwise. All p-values are two-tailed, and p-values equal to or less than 0.100 are italic. If medians are equal but there is a statistically significant
difference, we present means in a footnote to give insight as to directional implications (see footnote d); b unless we note otherwise, participants rate items on level of agreement with each statement on a scale of 1 (strongly
disagree) to 5 (strongly agree); c n 77, staff N 45, seniors N 32, male N 36, female N 30, Big 4 N 61, non-Big 4 N 16; d staff (seniors) mean is 3.56 (3.94); e scale is 1, 2, 3, 4 or 5 or more; f scale
is 1, 2, 3, 4 or 5 or more; g participants rate percent of time items on a scale of 0 (never) to 100 (all of time)
Table IV.
965
indicators
Audit quality
MAJ 4.4 Audit team activity
31,8/9 Table V presents findings for audit team activity items. Overall, respondents agree team
members work together well (median 4) and believe their audit teams are highly effective
in performing various audit tasks (medians range from a low of 80 per cent for appropriately
auditing key related party transactions to a high of 95 per cent for expressing an appropriate
audit opinion)[20]. With a few exceptions, seniors and staff generally agree on audit team
966 performance. Compared to seniors, staff perceive audit teams to be more effective at
obtaining a sufficient understanding of the client and its environment (median 90 per cent
versus 80 per cent), preparing adequate audit documentation (median 92.5 per cent versus
88 per cent), managing client-imposed pressures (median 90 per cent versus 82.5 per cent)
and testing internal controls of public clients (median 88 per cent versus 80.5 per cent). It
is possible relatively inexperienced staff have excessive confidence in the audit process,
which is tempered at the higher ranks.
Wefind,forthemostpart,maleandfemalerespondentsagreeauditteamsarehighlyeffective.
However, we find significant differences of opinion between men and women participants on
three items. Women report higher degrees of team effectiveness at obtaining a sufficient
understanding of the client and its environment (median 91 per cent versus 85 per cent),
properly evaluating adequacy of disclosure (median 90 per cent versus 84 per cent) and
gathering sufficient, competent audit evidence (median 92.5 per cent versus 89 per cent).
Both Big 4 and non-Big 4 auditors express similarly high levels of team effectiveness
in all but one item. Big 4 auditors express higher levels of team effectiveness at obtaining
a sufficient understanding of internal controls than non-Big 4 auditors report (median
85 per cent versus 75 per cent). This is probably because Big 4 auditors have more
experience conducting integrated audits for public clients, which requires the
understanding and testing of internal controls.
4.5 Audit firm environment

Table VI notes aspects of the audit firm environment that both positively and negatively
influence AQ. The audit firm environment is important because prior literature finds
management communication influences employees perceptions of organizational
support, giving employees a sense of value and contribution to the organization, which
increases employees performance (Neves and Eisenberger, 2012).
On the positive side, respondents agree that superiors value quality over quantity of
audit work and support their audit decisions, work hours are reasonable during
non-peak season and staffs workload is reasonable (medians 4)[21]. Respondents also
agree the firm encourages open communication with superiors (median 5). In
addition, respondents state a majority of the time firms include staff in pre-planning
activities (median 75 per cent), encourage professional skepticism (median 95 per
cent) and support staffs questioning mindset (median 88.5 per cent).
However, respondents agree that they often feel pressure to complete audit tasks and
auditor turnover is high (medians 4) but disagree that seniors workload is reasonable
(median 2). Respondents also note they are often interrupted for inquiries related to a
previous engagement (median 50 per cent) or non-audit related matters (median 42 per
cent), and reviewers identify deficiencies in firm quality control about half the time (median
49.5 per cent). Overall, while the audit firm environment appears supportive, junior-level
auditors perceptions of excessive time pressure, too many interruptions and unreasonable
workload can negatively impact their performance, thereby reducing overall AQ.

Sample Staff Seniors Male Female Big 4 Non-Big 4
Team members work

together very well 4.00 (3-5) 4.00 (3-5) 4.00 (3-5) 1.347 0.178 4.00 (3-5) 4.00 (3-5) 1.636 0.102 4.00 (3-5) 4.00 (4-5) 0.115 0.909
Team effectiveness at: c

Obtaining a sufficient
understanding of
internal controld 82.00 (25-100) 86.00 (50-100) 78.50 (25-100) 1.277 0.202 80.00 (25-100) 85.00 (60-100) 1.479 0.139 85.00 (25-100) 75.00 (49-98) 1.918 0.055
Obtaining a sufficient
understanding of the
client and its
environmente 88.00 (47-100) 90.00 (61-100) 80.00 (47-100) 2.511 0.012 85.00 (47-100) 91.00 (61-100) 2.150 0.032 89.00 (51-100) 80.00 (47-98) 1.528 0.127
Appropriately
identifying high audit
risk areasf 91.00 (50-100) 90.50 (50-100) 91.50 (70-100) 0.555 0.579 93.00 (50-100) 90.00 (61-100) 1.075 0.282 91.00 (61-100) 92.00 (50-100) 0.642 0.521
Recognizing fraud
risk factorsg 86.00 (50-100) 85.00 (50-100) 89.00 (58-100) 0.521 0.602 86.50 (50-100) 86.00 (61-100) 0.943 0.345 87.00 (58-100) 85.50 (50-98) 0.804 0.421
Adequately
responding to
identified audit risksf 88.50 (40-100) 88.50 (40-100) 88.50 (65-100) 0.100 0.920 89.50 (40-100) 85.00 (60-100) 0.266 0.790 90.00 (40-100) 80.00 (71-96) 1.211 0.226
Appropriately
auditing key-related
party transactionsh 80.00 (26-100) 80.00 (40-100) 80.50 (26-100) 0.017 0.986 79.00 (26-100) 82.00 (50-100) 1.153 0.249 79.50 (26-100) 81.00 (50-100) 0.461 0.644
Preparing adequate
audit documentationi 90.00 (39-100) 92.50 (39-100) 88.00 (65-100) 1.926 0.054 89.50 (39-100) 90.00 (66-100) 0.979 0.328 90.00 (66-100) 89.00 (39-100) 1.361 0.174
Team effectiveness at:

Properly evaluating
adequacy of
disclosurej 89.50 (50-100) 90.00 (58-100) 88.00 (50-100) 1.435 0.151 84.00 (50-100) 90.00 (58-100) 1.681 0.093 89.00 (50-100) 89.50 (63-98) 0.258 0.797
Adequately
communicating with
audit committeek 92.00 (50-100) 90.00 (50-100) 94.50 (51-100) 1.107 0.268 91.50 (50-100) 93.00 (75-100) 0.724 0.469 93.00 (75-100) 90.00 (50-100) 1.103 0.270
(continued)
Table V.
967
indicators
Audit quality
Audit team activitya

968
MAJ
31,8/9
Table V.
Adequately
communicating with
managementl 93.00 (51-100) 90.00 (51-100) 95.00 (61-100) 0.860 0.390 93.00 (51-100) 92.50 (62-100) 0.694 0.488 94.00 (51-100) 90.00 (61-100) 1.528 0.127
Expressing an
appropriate audit
opinionm 95.00 (70-100) 95.00 (75-100) 95.00 (70-100) 0.740 0.459 95.00 (70-100) 95.00 (78-100) 0.029 0.977 95.00 (70-100) 96.00 (75-100) 0.021 0.983
Managing client-
imposed pressuresn 88.00 (5-100) 90.00 (12-100) 82.50 (5-100) 2.241 0.025 83.50 (5-100) 90.00 (35-100) 1.547 0.122 88.00 (5-100) 87.50 (50-100) 0.491 0.623
Gathering sufficient,
competent audit
evidence 90.00 (66-100) 90.00 (66-100) 90.00 (68-100) 0.071 0.943 89.00 (66-100) 92.50 (74-100) 2.063 0.039 90.00 (66-100) 93.00 (75-98) 0.212 0.832
Exercising due
professional care 90.50 (34-100) 89.50 (34-100) 92.50 (62-100) 0.438 0.662 85.00 (34-100) 92.50 (73-100) 1.501 0.133 90.00 (34-100) 92.00 (72-100) 0.618 0.536
Maintaining an
appropriate level of
professional
skepticism 89.00 (50-100) 90.00 (66-100) 85.50 (50-100) 1.130 0.259 88.00 (50-100) 89.00 (57-100) 1.113 0.266 88.00 (57-100) 90.00 (50-98) 0.006 0.995
Correctly applying/
interpreting GAAP 91.00 (63-100) 90.50 (66-100) 93.50 (63-100) 0.657 0.511 91.00 (63-100) 91.00 (74-100) 0.848 0.396 91.00 (63-100) 92.00 (68-99) 0.540 0.589
Performing other
required audit
procedures 89.00 (47-100) 88.00 (47-100) 89.50 (72-100) 0.204 0.839 88.00 (47-100) 89.50 (72-100) 1.012 0.311 89.00 (47-100) 89.00 (50-98) 0.049 0.961
Testing internal
controls of public
clients 84.50 (0-100) 88.00 (0-100) 80.50 (0-100) 2.192 0.028 84.00 (0-100) 85.50 (0-100) 0.766 0.444 85.00 (32-100) 84.00 (0-95) 1.061 0.289
a
Notes: We use MannWhitney U tests to compare staff (N 46) versus seniors (N 32), male (N 37) versus female (N 40) and Big 4 firms (N 61) versus non-Big 4 firms (N 17). One participant chose not to
provide gender. N are as we indicate in parentheses, unless we note otherwise. All p-values are two-tailed, and p-values equal to or less than 0.100 are italic; b Unless we note otherwise, participants rate items on level of
agreement with each statement on a scale of 1 (strongly disagree) to 5 (strongly agree); c participants rate team effectiveness items on a scale of 0 (not at all effective) to 100 (extremely effective); d N 74, staff N
42, seniors N 32, male N 35, female N 39, Big 4 N 59, non-Big 4 N 15; e N 77, staff N 45, seniors N 32, male N 37, female N 39, Big 4 N 61, non-Big 4 N 16; f N 76, staff N 44, seniors
N 32, male N 36, female N 39, Big 4 N 61, non-Big 4 N 15; g N 75, staff N 43, seniors N 32, male N 36, female N 38, Big 4 N 61, non-Big 4 N 14; h N 71, staff N 39, seniors N 32, male
N 34, female N 37, Big 4 N 58, non-Big 4 N 13; i N 76, staff N 44, seniors N 32, male N 36, female N 39, Big 4 N 60, non-Big 4 N 16; j N 70, staff N 39, seniors N 31, male N 33, female
N 36, Big 4 N 56, non-Big 4 N 14; k N 69, staff N 37, seniors N 32, male N 34, female N 35, Big 4 N 56, non-Big 4 N 13; l N 73, staff N 41, seniors N 32, male N 35, female N 38, Big
4 N 57, non-Big 4 N 16; m N 72, staff N 40, seniors N 32, male N 33, female N 38, Big 4 N 57, non-Big 4 N 15; n N 72, staff N 40, seniors N 32, male N 34, female N 38, Big 4 N 58,
non-Big 4 N 14

My superiors value quality over

quantity of audit work 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 1.346 0.178 4.00 (2-5) 4.00 (2-5) 0.285 0.775 4.00 (2-5) 4.00 (3-5) 0.166 0.868
My superior supports my audit decisions 4.00 (3-5) 4.00 (3-5) 4.00 (3-5) 2.786 0.005c 4.00 (3-5) 4.00 (3-5) 0.075 0.940 4.00 (3-5) 4.00 (3-5) 0.699 0.484
I often feel pressure to complete audit tasks 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 0.571 0.568 4.00 (2-5) 4.00 (2-5) 1.381 0.167 4.00 (2-5) 4.00 (2-5) 0.978 0.328
Required work hours reasonable:

During peak season 3.00 (1-5) 3.00 (1-4) 4.00 (1-5) 1.122 0.262 3.00 (1-4) 3.00 (1-5) 0.293 0.769 3.00 (1-4) 4.00 (2-5) 2.674 0.007
During non-peak seasond 4.00 (1-5) 4.00 (1-5) 4.00 (1-5) 1.283 0.200 4.00 (1-5) 4.00 (1-5) 0.376 0.707 4.00 (1-5) 4.00 (1-5) 0.090 0.928
Auditor turnover at my firm is high 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 1.056 0.291 4.00 (2-5) 4.00 (2-5) 1.014 0.311 4.00 (2-5) 3.00 (2-5) 2.924 0.003
Partners workload is reasonabled 3.00 (2-5) 3.00 (2-5) 4.00 (2-4) 0.289 0.773 3.00 (2-4) 3.50 (2-5) 0.444 0.657 3.00 (2-5) 4.00 (2-4) 1.602 0.109
Managers workload is reasonabled 3.00 (1-4) 3.00 (2-4) 2.00 (1-4) 1.983 0.047 3.00 (1-4) 3.00 (2-4) 0.869 0.385 3.00 (1-4) 3.00 (2-4) 0.816 0.414
Seniors workload is reasonabled 2.00 (1-5) 3.00 (1-5) 2.00 (1-4) 1.193 0.233 2.50 (1-4) 2.00 (1-5) 0.646 0.519 2.00 (1-5) 3.00 (2-4) 1.250 0.211
Staffs workload is reasonable 4.00 (1-5) 4.00 (1-5) 3.00 (1-4) 0.886 0.375 4.00 (1-4) 4.00 (1-5) 0.133 0.894 3.00 (1-5) 4.00 (2-4) 0.958 0.338
Firm encourages open
communication with superiors 5.00 (2-5) 5.00 (2-5) 5.00 (3-5) 0.075 0.940 5.00 (3-5) 5.00 (2-5) 0.017 0.986 5.00 (2-5) 5.00 (4-5) 0.692 0.489
(continued)
environmenta
Audit firm
Table VI.
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Audit quality
970
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Table VI.
Percent of time: e
Firm includes staff in pre-planning activities 75.00 (20-100) 81.00 (25-100) 70.50 (20-100) 2.521 0.012 76.00 (20-100) 75.00 (25-100) 0.521 0.602 75.00 (20-100) 85.00 (49-100) 1.408 0.159
Firm encourages professional skepticism 95.00 (25-100) 93.00 (25-100) 97.00 (38-100) 0.644 0.520 93.00 (25-100) 96.00 (49-100) 0.615 0.538 95.00 (38-100) 97.00 (25-100) 0.117 0.907
Firm supports staffs questioning mindset 88.50 (13-100) 85.00 (14-100) 90.50 (13-100) 1.020 0.308 90.00 (13-100) 88.50 (50-100) 0.484 0.628 90.00 (13-100) 85.00 (50-100) 0.428 0.669
Reviewers identify deficiencies in
engagement workpapersf 50.00 (5-100) 56.00 (7-100) 50.00 (5-100) 1.831 0.067 50.00 (5-100) 52.00 (10-100) 0.504 0.614 50.00 (5-100) 50.00 (9-100) 0.076 0.939
Reviewers identify deficiencies in audit
firms quality controlg 49.50 (1-100) 50.00 (5-100) 25.00 (1-100) 1.340 0.180 50.00 (1-100) 49.00 (1-100) 0.164 0.870 50.00 (1-100) 25.00 (1-100) 0.395 0.693
Experience interruptions for:

Inquiries related to your current engagement 75.00 (3-100) 72.50 (3-100) 75.00 (32-100) 1.758 0.079 75.00 (3-95) 74.50 (25-100) 0.067 0.947 75.00 (3-100) 76.00 (28-99) 0.676 0.499
Inquiries related to a previous engagement 50.00 (2-93) 50.00 (2-93) 50.00 (11-81) 0.276 0.783 50.00 (2-90) 50.00 (6-93) 0.543 0.587 50.00 (2-93) 65.00 (11-84) 2.142 0.032
Non-audit related interruptions from others 42.00 (2-91) 36.50 (2-91) 50.00 (8-91) 1.736 0.083 42.00 (2-91) 44.00 (6-91) 0.261 0.794 37.00 (2-91) 56.00 (25-91) 3.451 0.001
Notes: a We use MannWhitney U tests to compare staff (N 46) versus seniors (N 32), male (N 37) versus female (N 40) and Big 4 firms (N 61) versus non-Big 4 firms (N 17). One participant chose not to
difference, we present means in a footnote to give insight as to directional implications (see footnote c); b unless we note otherwise, participants rate items on level of agreement with each statement on a scale of 1 (strongly
disagree) to 5 (strongly agree); c staff (seniors) mean is 3.76 (4.13); d N 77, staff N 45, seniors N 32, male N 36, female N 40, Big 4 N 61, non-Big 4 N 16; e participants rate percent of time items on a
scale of 0 (never) to 100 (all of time); f N 43, staff N 25, seniors N 18, male N 21, female N 22, Big 4 N 27, non-Big 4 N 16; g N 42, staff N 24, seniors N 18, male N 21, female N 21, Big 4 N 27,
non-Big 4 N 15
In comparing responses by rank, gender and firm size, a few notable differences Audit quality
emerge. Seniors (median 2), as opposed to staff (median 3), are less likely to agree indicators
managers workload is reasonable. This is likely because seniors have more direct contact
with managers and thus have a better understanding of managers workload. Regarding
work hours and turnover, non-Big 4 respondents express higher levels of agreement than
Big 4 respondents that peak season work hours are reasonable (median 4 versus 3). They
also report (as compared to Big 4 respondents) lower levels of agreement that audit turnover 971
is high (median 3 versus 4). The results support the view that non-Big 4 firms are more
successful at creating a work/life balance than their Big 4 counterparts (Buchheit et al., 2014).
Interesting discrepancies exist when reviewing the per cent of time auditors experience
interruptions and believe audit firms spend on audit-related activities. Staff and seniors
report that reviewers identify deficiencies in engagement workpapers 56 per cent versus 50
per cent of the time, respectively[22]. One explanation is staffs work may be subject to closer
scrutiny or staff receives more feedback relating to workpaper deficiencies. Staff and seniors
also report differently regarding how often firms include staff in pre-planning activities
(median 81 per cent versus 70.5 per cent, respectively). It is possible that seniors are more
aware when staff is excluded from pre-planning activities.
Not surprisingly, seniors experience interruptions more often than staff on current
engagements (median 75 per cent versus 72.5 per cent). Interestingly though, seniors
report more non-audit related interruptions (median 50 per cent versus 36.5 per
cent)[23]. This can be particularly problematic because seniors are also under greater
time pressure and engage in more multi-tasking. Respondents at non-Big 4 firms report
being interrupted more often than Big 4 respondents report for non-audit related reasons
(median 56 per cent versus 37 per cent) and for inquiries related to previous
engagements (median 65 per cent versus 50 per cent). The findings suggest non-Big
4 firms should review processes to minimize active audit engagements interruptions.
Our last AQ construct considers activity at the audit firm level.
4.6 Audit firm activity

Table VII reports on activities audit firms engage in relating to AQ. Respondents agree
engagement team size is adequate, they and their colleagues are adequately trained in
their industries, training they receive improves their audit skills, their work and their
colleagues work are always supervised and firms adequately communicate guidance on
professional standards (medians 4)[24]. This is important as extant literature finds
auditors perceived strength of their firms quality control and review procedures
relates negatively with behaviors that reduce AQ (Malone and Roberts, 1996, p. 49).
Respondents also state that firms spend a majority of time on AQ-enhancing activities,
including engagement pre-planning (median 90.5 per cent), brainstorming sessions
(median 76 per cent), pre-engagement fraud risk assessments (median 91.5 per cent) and
random reviews of engagements by both corporate office (median 75 per cent) and peer
firms (median 75 per cent). One item that could lead to lower AQ is the high percentage of
time audit firms rely on the work of outside non-specialists (median 69 per cent). In fact,
academic literature finds lower financial reporting quality and higher litigation risk when
the external auditor relies on the work of internal auditors (Bame-Aldred et al., 2013). These
potential negative consequences could be in part because of an unconscious bias as
described by Brody et al. (2015), whereby internal auditors are asked to provide a consulting
service (serve their client), as well an assurance service (assist the external auditor).
972
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31,8/9
Table VII.
Audit firm activitya
Team size is adequate

for the engagement 4.00 (1-5) 4.00 (1-5) 4.00 (2-5) 0.638 0.523 4.00 (1-5) 4.00 (2-5) 0.929 0.353 4.00 (1-5) 4.00 (2-5) 2.491 0.013c
I am adequately trained in
the industries in which I work 4.00 (2-5) 4.00 (2-5) 4.00 (3-5) 2.135 0.033d 4.00 (2-5) 4.00 (2-5) 2.129 0.033d 4.00 (2-5) 4.00 (3-5) 0.227 0.821
My colleagues are adequately
trained in the industries
in which they work 4.00 (2-5) 4.00 (3-5) 4.00 (2-5) 0.904 0.366 4.00 (3-5) 4.00 (2-5) 2.182 0.029e 4.00 (3-5) 4.00 (2-5) 0.625 0.532
Training received from firm:

Improves auditor-judgment skills 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 0.052 0.958 4.00 (2-5) 4.00 (2-5) 2.029 0.043f 4.00 (2-5) 4.00 (2-5) 1.235 0.217
Improves client-interviewing skills 4.00 (1-5) 4.00 (2-5) 4.00 (1-5) 1.598 0.110 4.00 (1-5) 4.00 (2-5) 1.558 0.119 4.00 (2-5) 4.00 (1-5) 1.326 0.185
Develops professional skepticism skills 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 0.260 0.795 4.00 (2-5) 4.00 (2-5) 1.474 0.141 4.00 (2-5) 4.00 (2-5) 0.343 0.732
Improves technical skills 4.00 (2-5) 4.00 (2-5) 4.00 (3-5) 2.008 0.045g 4.00 (2-5) 4.00 (3-5) 2.371 0.018g 4.00 (2-5) 4.00 (2-5) 0.455 0.649
Improves analytical review skills 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 0.728 0.467 4.00 (2-5) 4.00 (2-5) 2.031 0.042h 4.00 (2-5) 4.00 (2-5) 0.461 0.645
My work is always supervised
during engagements 4.00 (1-5) 4.00 (1-5) 4.00 (2-5) 0.987 0.324 4.00 (2-5) 4.00 (1-5) 2.194 0.028i 4.00 (1-5) 4.00 (2-5) 0.790 0.429
My colleagues work is always
supervised during engagements 4.00 (1-5) 4.00 (1-5) 4.00 (2-5) 1.238 0.216 4.00 (2-5) 4.00 (1-5) 2.794 0.005j 4.00 (1-5) 4.00 (2-5) 1.079 0.281
k
Percent of time:
Firm engages in pre-planning prior
to the start of each engagement 90.50 (36-100) 95.50 (50-100) 83.00 (36-100) 3.290 0.001 90.00 (49-100) 93.00 (36-100) 0.620 0.535 89.00 (47-100) 94.00 (36-100) 0.012 0.990
Firm engages in brainstorming sessions 76.00 (0-100) 78.50 (26-100) 75.00 (0-100) 0.810 0.418 76.00 (0-100) 75.00 (50-100) 0.082 0.935 75.00 (0-100) 85.00 (26-100) 0.723 0.470
Firm assesses clients fraud
risk prior to audit engagements 91.50 (6-100) 90.50 (68-100) 93.00 (6-100) 0.228 0.820 93.00 (6-100) 90.50 (45-100) 0.437 0.662 91.00 (6-100) 92.00 (68-100) 0.543 0.587
(continued)

Firm engages services of outside

specialists/expertsl 50.00 (0-100) 51.50 (1-100) 43.50 (0-91) 2.625 0.009 50.00 (0-100) 50.00 (0-100) 0.448 0.654 50.00 (0-100) 25.00 (1-75) 2.049 0.041
Firm engages services of in firm
specialists/experts (e.g. IT)m 75.00 (5-100) 75.00 (36-100) 84.50 (5-100) 0.913 0.361 75.00 (25-100) 75.00 (5-100) 0.429 0.668 83.50 (36-100) 50.00 (5-89) 4.046 0.000
Firm relies on the work of others
(e.g. internal auditors or client personnel)n 69.00 (0-100) 66.00 (10-100) 74.00 (0-96) 0.184 0.854 74.50 (4-100) 63.00 (0-100) 1.030 0.303 75.00 (5-100) 25.00 (0-66) 4.751 0.000
Firm engages services of other auditorso 25.00 (0-100) 34.00 (0-100) 25.00 (0-82) 2.440 0.015 25.00 (0-100) 25.00 (0-82) 0.942 0.346 25.00 (0-100) 24.50 (0-50) 1.482 0.138
Percent of time:
Audit engagements are randomly
reviewed by corporate officep 75.00 (10-100) 70.00 (10-100) 83.00 (10-100) 1.755 0.079 77.00 (10-100) 50.00 (10-100) 1.915 0.056 68.50 (15-100) 100.00 (10-100) 1.717 0.086
Audit engagements are randomly
reviewed by peer firmsq 75.00 (10-100) 57.50 (10-100) 75.00 (25-100) 1.601 0.109 75.00 (10-100) 69.50 (14-100) 0.615 0.538 50.00 (14-100) 100.00 (10-100) 2.367 0.018
Firm adequately communicates guidance on:

Professional standards 4.00 (3-5) 4.00 (3-5) 5.00 (3-5) 1.179 0.238 5.00 (3-5) 4.00 (3-5) 0.560 0.575 4.00 (3-5) 4.00 (3-5) 0.394 0.694
Firms policies and methodologies 5.00 (3-5) 5.00 (3-5) 5.00 (3-5) 0.382 0.702 5.00 (3-5) 4.50 (4-5) 0.466 0.641 5.00 (3-5) 5.00 (3-5) 0.166 0.868
Engagement partners thoroughly
review all engagements 4.00 (2-5) 4.00 (2-5) 4.00 (2-5) 0.139 0.889 4.00 (2-5) 4.00 (3-5) 0.514 0.608 4.00 (2-5) 4.00 (2-5) 1.016 0.310
Concurring (second) audit partners
appropriately review all engagements 4.00 (2-5) 4.00 (2-5) 4.00 (3-5) 1.257 0.209 4.00 (3-5) 4.00 (2-5) 0.369 0.712 4.00 (3-5) 4.00 (2-5) 0.141 0.888
a
Notes: We use MannWhitney U tests to compare staff (N 46) versus seniors (N 32), male (N 37) versus female (N 40) and Big 4 firms (N 61) versus non-Big 4 firms (N 17). One participant chose not to
difference, we present means in a footnote to give insight as to directional implications (see footnotes c, d, e, f, g, h, i and j); b unless we note otherwise, participants rate items on level of agreement with each statement
on a scale of 1 (strongly disagree) to 5 (strongly agree); c big 4 (non-Big 4) mean is 3.21 (3.88); d staff (seniors) mean is 3.65 (4.03). Male (female) mean is 4.00 (3.68); e male (female) mean is 4.14 (3.88); f male (female) mean
is 4.00 (3.63); g staff (seniors) mean is 3.83 (4.22). Male (female) mean is 4.16 (3.88); h male (female) mean is 4.05 (3.73); i male (female) mean is 3.89 (3.33); j male (female) mean is 3.92 (3.20); k participants rate percent
of time items on a scale of 0 (never) to 100 (all of time); l N 72, staff N 40, seniors N 32, male N 34, female N 38, Big 4 N 57, non-Big 4 N 15; m N 73, staff N 41, seniors N 32, male N 34, female
N 39, Big 4 N 58, non-Big 4 N 15; n N 73, staff N 41, seniors N 32, male N 34, female N 39, Big 4 N 59, non-Big 4 N 14; o N 72, staff N 40, seniors N 32, male N 34, female N 38,
Big 4 N 58, non-Big 4 N 14; p N 37, staff N 21, seniors N 16, male N 17, female N 20, Big 4 N 26, non-Big 4 N 11; q N 39, staff N 22, seniors N 17, male N 19, female N 20, Big 4 N
26, non-Big 4 N 13
Table VII.
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indicators
Audit quality
MAJ Overall, respondents agree that their firm is engaging in AQ-enhancing activities.
31,8/9 Aside from a few notable exceptions seen in Table VII, this agreement transcends rank,
gender and firm size. Regarding percentage of time spent on audit firm activities, staff
respond with higher percentages than seniors for pre-planning (median 95.5 per cent
versus 83 per cent), use of outside specialists or experts (median 51 per cent versus
43.5 per cent) and engaging services of other auditors (median 34 per cent versus 25
974 per cent). However, seniors respond with a higher percentage of time than staff that
corporate office randomly reviews audit engagements (median 83 per cent versus 70
per cent)[25]. Perhaps the most concerning difference is seniors perceptions that audit
firms do not engage in pre-planning 17 per cent of the time. Failure to properly plan an
audit engagement can lead to poor AQ and potential restatements.
Gender differences are generally not prevalent across audit firm activity items, with
the notable exception that males perceive a much higher percentage of audit
engagements are randomly reviewed by corporate office than females (median 77 per
cent versus 50 per cent). As expected, significant differences in audit firm activities exist
between Big 4 and non-Big 4 audit firms. Big 4 firms more often engage outside
specialists (median 50 per cent versus 25 per cent) and internal specialists (median
83.5 per cent versus 50 per cent). Given the complexity and scope of Big 4 audit clients,
it is not surprising that Big 4 firms are often engaging specialists. However, it appears
Big 4 firms are more often engaging in activities that can reduce the level of AQ.
Respondents at Big 4 firms report relying more often on work of others (median 75 per
cent versus 25 per cent) and less often having engagements randomly reviewed by corporate
office (median 68.5 per cent versus 100 per cent)[26] and peer firms (median 50 per cent
versus 100 per cent). Relying too heavily on outsiders work, without an appropriate level of
monitoring and not having adequate engagement review can lead to lower levels of AQ.
5. Limitations and conclusion

In this section, we discuss some limitations to the study and conclude. The nature and
number of survey questions prevents the reliable use of factor analysis to classify our
research questions. The inability to perform factor analysis is mitigated by having four
independent coders code each question into the six categories. As survey responses were
collected electronically and anonymously with no clear separation of early and late
responses, we are unable to adequately assess the presence of non-response bias. Finally, our
study reports auditors perceptions of AQIs; our survey did not ask participants to directly
link AQIs to actual audit failures (a common existing measure of AQ).
Notwithstanding the studys limitations, our results provide insights on activities
individual auditors engage in and conditions audit firms promote that impact AQ. The
results also identify differences and similarities in auditors perceptions of AQIs by
experience level, gender and audit firm size. We find that individual auditors generally
tend to engage in activities that improve AQ, with some experience level, gender and
audit firm size differences. Overall, participants enjoy their jobs, feel accomplished and
appreciated by superiors and believe that superiors support their audit decisions.
Participants express knowledge of US accounting and auditing standards and
confidence in their ability to apply their knowledge in audit engagements. Participants
believe they are adequately trained, audit teams are effective, the audit firm
environment in which they work is conducive to producing high quality audits and
firms generally engage in audit activities that enhance AQ. The positive nature of the
responses to these AQIs, as well as the relative lack of variation in responses, suggest Audit quality
the PCAOB should reduce their focus on these items. indicators
However, we identify several areas that do create cause for concern. First, respondents report
not being knowledgeable on international standards and not confident in applying those
standards.Whilesomeparticipantsmaynotuseinternationalstandardsonauditsoftheircurrent
clients, larger firms have clients applying international standards. This lack of knowledge could
impede AQ for these participants future audits. As previously discussed, technical knowledge is 975
an important component of AQ. Second, participants report high levels of multi-tasking and
interruptions. These issues particularly plague seniors and auditors at non-Big 4 firms. AQ will
likely be impaired if auditors become too distracted in the course of completing an audit unless
firms take action to mitigate this potential problem. Multi-tasking in general has been found to be
associated with reduced AQ. Third, junior level auditors often feel overworked and time
pressured. Overworked auditors are at a higher risk of job burnout which can lead to poor audit
performance. Finally, some audit firms activities may be hindering the production of
high-quality audits. Specifically, reliance on outside work, particularly by Big 4 firms, can be
problematic if the outside work is not performed at the same high-quality standards as the firms
own work or if the outside work is not adequately supervised.
The results of this study should be of interest to audit firms and regulators because
more thought is given to how the audit process, and in particular work done by
junior-level auditors, influences AQ. While participant responses generally support the
notion that audit firms policies and procedures encourage high-quality audits, this
study identifies several key areas for further review (such as, technical knowledge
deficiencies, burnout, multitasking, reliance on outside work) to ensure a continuous
standard of excellence in auditing and protect the public interest.
Acknowledgements
The authors thank the firms and survey respondents who participated in this study.
They appreciate feedback from participants at the American Accounting Association
2013 Midwest Meeting and the 2014 Florida Atlantic University Accounting Doctoral
Alumni Symposium. They appreciate comments and suggestions from Larry Abbott,
Colleen Boland, Brian Daugherty, Jennifer Joe, Anna Johnson, Aleece Koller (senior at
Big 4 Firm), Kevin Rich, Jesse Robertson, Jrgen Sidgman and Ikseon Suh. The authors
also thank our coders, Anna Johnson and Q Ling, as well as three anonymous reviewers,
for the American Accounting Association 2015 and 2014 Accounting, Behavior and
Organization Section and 2015 Auditing Section Research Conferences for helpful
comments on earlier drafts of this paper.
Notes
1. The FRC is based in the UK and is charged with regulating the accounting and auditing
professions there. Thus, the FRCs AQ framework is not specifically designed for the US audit
markets.
2. For purposes of this study, junior-level auditors refer to staff and seniors (referenced by some
firms as in-charge). Current practice also refers to entry-level staff and senior auditors as
associates and senior associates, respectively. The terms junior, junior-level and staff
and seniors are used interchangeably throughout this paper.
3. Because our primary target is junior-level auditors, we limit survey items to audit
professionals and audit process relevant at staff and senior levels, as items relating to audit
MAJ results are more pertinent to upper-level auditors. Extant literature suggests audit research
31,8/9 lacks in the areas of individual auditor characteristics and the structure and operations of
accounting firms (Francis, 2011). Further, a recent study suggests upper-level auditors and
investors definitions of AQ relate primarily to inputs (corresponding to the PCAOBs audit
professionals category) and process (Christensen et al., 2015).
4. The results section provides details on auditors perceptions of the work provided by both
976 specialists (experts) and non-specialists (e.g. internal auditors or client personnel). The term
specialist refers to persons with specialized skill and knowledge, who may be firm
personnel or retained by the firm (PCAOB 2015a, A-5). Outside non-specialist refers to the
firms outsourcing of audit work that does not require specialized skill or knowledge, from
domestic or international sources.
5. An earlier version of the survey instrument was reviewed by at least one practicing auditor at
each professional level (staff, senior, manager and partner). Based on feedback received, a
modified version of the instrument was pilot tested using 20 graduate accounting information
systems (AIS) students from a large public Midwest university before the final instrument
was administered online to survey participants. To assist with the review process, a hardcopy
of the online survey is available upon request.
6. Participants were solicited through a list of auditing professionals obtained from a state CPA
society and authors personal contacts at Big 4 and non-Big 4 firms. To avoid duplicates, we
eliminated professionals employed with firms we contacted personally from the state CPA
society list.
7. The 36 participants who did not complete the survey do not include participants who may
have periodically skipped a survey item. We reflect these cases in the N for our analyses.
8. Our response rate is similar to other recent accounting research studies (Dowling, 2009, 30 per
cent; Graham et al., 2014, 27 per cent).
9. One participant chose not to provide gender information.
10. Chi-square tests reveal no significant differences for firm size/gender, firm size/rank and
gender/rank.
11. The PCAOB (2015b) recently released a staff consultation paper detailing benefits and
concerns of using outside specialists. In addition, reliance on outside work is a recurring
deficiency cited in PCAOB inspection reports.
12. Independent coders were assistant professors from unaffiliated four-year academic
institutions with professional audit experience and the CPA designation.
13. Except for percent items, medians are on an ordinal scale of one to five. We utilize an ordinal
scale for most response variables and thus report and conduct analyses based on median
instead of mean values. Mean tests are not appropriate when using ordinal data (Nunnally
and Bernstein, 1994) or when data is skewed (McCrum-Gardner, 2008; Pallant, 2013). In all
cases where there is significant difference (p 0.100) between groups, means and medians are
directionally consistent. Statistically significant median differences indicate one group more
strongly agreeing with a survey question relative to the other group (e.g. staff more strongly
agree they are confident in applying IAASB auditing standards relative to seniors, which
could suggest international audit work performed by a staff may be of lower quality than that
performed by a senior). In some cases, medians are equal but there is a statistically significant
difference between groups. In these cases, we present means in a table footnote to give insight Audit quality
as to directional implications.
indicators
14. Unless we indicate otherwise, participants rated items for level of agreement on a scale of one
(strongly disagree) to five (strongly agree).
15. Knowledge items are on a scale of one (no knowledge) to five (expert knowledge). Confidence
items are on a scale of one (not at all confident) to five (extremely confident).
16. Only seven seniors and six staff report having international audit experience.
977
17. Participants rate I am more knowledgeable than my superior on many audit issues item for
level of agreement on a scale of one (strongly disagree) to five (strongly agree).
18. Unless we indicate otherwise, participants rate items for level of agreement on a scale of one
(strongly disagree) to five (strongly agree) and percent items on a scale of zero (never) to one
hundred (all of time).
19. Scale is 1, 2, 3, 4, or 5 or more.

20. Participants rate team members work well together item for level of agreement on a scale of
one (strongly disagree) to five (strongly agree). Remaining items, relating to team
effectiveness, are on a scale of zero (not at all effective) to one hundred (extremely effective).
21. Except for percent items, participants rate items for level of agreement on a scale of one
(strongly disagree) to five (strongly agree). Percent items are on a scale of zero (never) to one
22. Difference between the staff and seniors perceptions of how often reviewers identify
deficiencies in engagement workpapers is insignificant if we compare means (60.28 per cent
versus 49.39 per cent; t 1.356, p 0.183).
23. Difference between the staff and seniors perceptions of how often they experience non-audit
related interruptions is insignificant if we compare means (40.89 per cent versus 47.88 per
cent; t 1.356, p 0.179).
24. Except for percent items, participants rate items for level of agreement on a scale of one
(strongly disagree) to five (strongly agree). Percent items are on a scale of zero (never) to one
25. Difference between the staff and seniors perceptions of how often corporate office randomly
reviews audit engagements is insignificant if we compare means (61.57 per cent versus 75.88
per cent; t 1.542, p 0.132).
26. Difference between Big 4 and non-Big 4 junior-level auditors perceptions of how often
corporate office randomly reviews audit engagements is insignificant if we compare means
(63.77 per cent versus 77.18 per cent; t 1.323, p 0.194).
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Veena L. Brown can be contacted at: brownvml@uwm.edu
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Audit quality indicators: Audit quality

University of Wisconsin Milwaukee, Milwaukee, Wisconsin, USA

1. Introduction Managerial Auditing Journal

We present analyses of the perceptions of 78 junior-level auditors as a full sample and

2. Background and literature review

2.1 Audit quality framework

2.2 Audit quality indicators

3.1 Survey instrument

Panel A: Auditor professionals

Rank Audit firm size

Panel B: Auditor experience

Experience by client type Public (%) Private (%) Other (%)

Industry experienceb Conduct engagements (%) Specialize (%)

items into one of the following six categories:

An alternative approach to categorization is exploratory factor analysis (EFA). We do

4.1 Auditor mood or affect

4.2 Auditor knowledge and confidence

Full Rank Gender Audit firm size

Confidence in ability to:

Full Rank Gender Audit firm size

Confidence in ability to:

4.3 Individual auditor activity

CPE courses I take

Full Rank Gender Audit firm size

4.5 Audit firm environment

Full Rank Gender Audit firm size

Team members work

Team effectiveness at: c

Team effectiveness at:

Audit team activitya

Full Rank Gender Audit firm size

My superiors value quality over

Required work hours reasonable:

Experience interruptions for:

4.6 Audit firm activity

Team size is adequate

Training received from firm:

Full Rank Gender Audit firm size

Firm engages services of outside

Firm adequately communicates guidance on:

5. Limitations and conclusion

19. Scale is 1, 2, 3, 4, or 5 or more.

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