Audit Quality on Earnings Management : Evidence from

Abstract

The quality of an audit is one of the influential factors in the improvement of financial transparency and the assurance of stakeholders in corporate reporting. It shows the capability of the auditor to identify and disclose material misstatements, which enhances the credibility of the financial statements. The notion has changed to compliance but focused on ethical integrity, independence of the auditor and professional skepticism as elements of audit effectiveness. The quality of audits helps to alleviate agency costs as they verify the accuracy of management disclosures without favoritism, thus decreasing information asymmetry between the shareholders and the management. Recent research has also linked audit quality to firm-specific variables including tenure, transparency of the audit firm, and low governance structure of the audit firm. The audit practices have been redesigned through the regulatory framework and technological innovations, such as data analytics, which enhance the effectiveness and precision of the audit procedure. Also, the COVID-19 brought additional pressure to a conventional form of auditing, enhancing the transition towards remote and technology-supported auditing, which affected attitudes to audit quality. Essentially, audit quality is a complex entity that is determined by ethical standards, competence of the auditor, regulatory influence, and integration of technology. The audit quality should be maintained in orde