Regulating audit quality : restoring trust and legitimacy

Holm, Claus & Zaman, Mahbub (2012) Regulating audit quality : restoring trust and legitimacy. Accounting Forum, 36(1), pp. 51-61.

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Abstract

The global financial crsis, corporate failures and scandals in amny countries raise significant questions audit quality. In the UK, the FRC took the unprecedented step of codifying audit quality in its ‘Audit Quality Framework’. We analyze the extent to which audit firms, professional bodies, and investors considered the FRC proposals sufficient for addressing concerns about audit quality. Using impression management and legitimacy as a framework to analyze stakeholder responses we go beyond audit quality drivers identified by the FRC. In contrast to the drivers identified by the FRC, our focus on transparency, expertise, professionalism and commercialization of the audit shows that FRC, audit firms and professional bodies have mainly focused on issues which possibly do not pose a threat to the commercial interest of audit firms. Overall, our analysis shows that regulatory and professional bodies engaged in image management and the promotion of audit quality in an attempt to remedy tarnished image and augment their legitimacy and standing. In attempting to restore trust and legitimacy regulatory bodies, such as the FRC, have to reconcile complex often contradictory stakeholder demands.

Impact and interest:

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ID Code: 79421
Item Type: Journal Article
Refereed: Yes
Additional URLs:
Keywords: Audit quality, Regulation, Audit firms, Impression management
DOI: 10.1016/j.accfor.2011.11.004
ISSN: 1467-6303
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Copyright Owner: © 2011 Elsevier Ltd. All rights reserved.
Deposited On: 12 Dec 2014 00:55
Last Modified: 06 Jan 2015 00:29

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