Abstract

The 2006 EU Directive established an EU-wide system for public oversight of the audit profession. In the UK, since 2008 the Financial Reporting Council (FRC) has published inspection reports for major audit firms, which include overall quality ratings for the individual audit engagements of each audit firm under review. This study examines the FRC’s ratings, and measures their impact on audit fees and audit firm switching. A significant increase in audit fees is found when the audit firm has a higher proportion of engagements with deficient ratings, probably arising from the additional effort and resources needed to meet the FRC’s requirements. This impact is more concentrated among clients with Big 4 audit firms. However, there is no evidence that FRC ratings affect clients’ likelihood of switching audit firms, suggesting that inspection results may not signal audit quality, and thus do not affect clients’ audit firm appointment decisions. The results provide evidence that inspection ratings may increase audit costs, but may not be valuable in distinguishing audit quality, and thus have no effect on audit committees’ audit firm appointment decisions. This finding advances understanding of the effectiveness of the audit inspection regime, and provides auditing regulators with guidance on policy making.

摘要

2006年《欧盟指令》建立了整个欧盟范围内的审计专业监督体系。在英国，自2008年以来，财务报告委员会（FRC）已发布了针对主要审计公司的检查报告，其中包括对每个接受审核的审计公司的个别审计业务的总体质量评级。这项研究检查了FRC的评级，并衡量了它们对审计费用和审计公司转换的影响。当审计公司的业务中有较高比例的评级不足的审计业务时，审计费用会显着增加，这可能是由于满足FRC要求而付出的额外努力和资源所致。这种影响更集中在拥有四大会计师事务所的客户中。但是，没有证据表明FRC评级会影响客户更换审计公司的可能性，这表明检查结果可能并不表示审计质量，因此不会影响客户的审计事务所任命决定。结果提供了证据，表明检验评级可能会增加审计成本，但在区分审计质量方面可能没有价值，因此对审计委员会的审计事务所任命决策没有影响。这一发现提高了对审计检查制度有效性的理解，并为审计监管机构提供了政策制定的指导。