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Journal of Accounting and Economics Vol. 58 No. 2-3 2014

Issues raised by studying DeFond and Zhang: What should audit researchers do?

John Donovan1,2,3; Richard M. Frankel1,2,3; Joshua Lee1,2,3; Xiumin Martin1,2,3; Hojun Seo1,2,3

1 Florida State University · 2 Florida A&M University - Florida State University College of Engineering · 3 Washington University in St. Louis

Abstract

We view audit-quality choice as one among many that managers make to maximize firm value. We question whether audit-quality differences among publicly traded companies are of significant interest to investors, clients, and auditors and ask for research on this topic. Relatedly, we ask for research on whether auditors and their clients show behavior consistent with regulated audit quality exceeding the audit quality level demanded absent regulation. We propose that researchers incorporate the competitive advantages of auditors and the institutional features of the audit process into the definition of audit quality. We propose that audit quality research test for externalities and inefficiencies to understand whether auditors and their clients are choosing the efficient level of audit quality. We note the legislative, judicial, and executive powers residing in the PCAOB.

DOI
10.1016/j.jacceco.2014.09.001
Volume
58
Issue
2-3
Pages
327-338
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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