Audit Quality Indicators: PCAOB Concept Release

Michael Bernth Nielsen

Student thesis: Master thesis


The purpose of this master thesis has been to explore the possible use and consequences of implementing quantitative measures of audit quality, as proposed by PCAOB in its Concept Release on Audit Quality Indicators. The analysis firstly explores how internationally recognized academics see research in the quality of audit. This is then compared with the views presented in the Concept Release. Furthermore the views of key Danish stakeholders and users of Audit Quality Indicators are analyzed, with focus on the implications such indicators could have if implemented in Denmark. The main findings are:  The quality of an audit is unknown and non-observable, and there is no unified and agreed-upon definition of audit quality. Hence, we do not know for certain how to measure it.  Research in audit is in a deadlock. The lack of data to do research in the quality of audit is preventing researchers from lifting research to the next level. And we do not know for certain how to obtain the missing data.  There is an overweight amongst stakeholders who are positive on defining common metrics of audit quality. But the specific design and use of the metrics is far from agreed upon. The AQI Concept Release is first of all a presentation of 28 potential indicators of audit quality. On top of that the Concept Release is an invitation for comments on its contents. When analyzing these comments it becomes obvious that the stakeholders of the proposed measures far from agree on how such quantitative metrics should be designed and used. Especially the question on whether they should be made publically available has generated many comments with different opinions. The suggested metrics are not going to be perfect, and there will be situations where they are more misleading than guiding. But the deadlock that international research is presently in, and the lack of information available to audit committees is to the extent of this analysis not going to be resolved better in any other way. The analysis in this thesis has shown no alternative with equally promising possibilities, and status quo seems as an even worse option.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages134
SupervisorsJørgen Valther Hansen