Does Convergence with International Standards on Auditing Improve Audit Quality?
Hope, Ole-Kristian, Wang, Cyndia, Wu, Yaqian, Zhang, Min
The Accounting Review · 2025 · Volume 100 · Issue 2
Abstract
Many countries have converged their domestic auditing standards with International Standards on Auditing (ISA). This study provides global empirical evidence onfirst-orderdeterminants of audit quality by examining whether and how convergence affects audit quality through utilizing data on 41 jurisdictions and using a staggered difference-in-differences approach. We find that ISA convergence leads to higher audit quality on average. The positive effect is stronger for clients of domestic audit firms, in jurisdictions with stronger enforcement, and when the ISA convergence level is higher. Insights from textual features suggest that changes in principle-orientation, comparability, readability, and size (or length) of auditing standards are positively related to audit quality. Exploratory analyses of textual content using machine learning reveal that the emphases of ISA on going-concern assessment and legal compliance, fraud risk assessment and internal control evaluation, and related-party transactions and subsequent events contribute to enhanced audit quality. JEL Classifications:M40; M42; M48.
Keywords
International Standards on Auditing, audit quality, audit firms, enforcement, auditing standards
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