| Component | ||||
Expertise and Independence | Tenure and Restatements | Image | Size | Non-audit services and rotation | |
Higher level of an audit firm’s relevant industry expertise increases audit quality. | 0.851 |
|
|
|
|
Audit firm’s expertise is better able to deliver audit quality of high technical competence. | 0.837 |
|
|
|
|
High level of independence leads to high audit quality. | 0.697 |
|
|
|
|
Long auditor tenure leads to high audit quality. |
| 0.883 |
|
|
|
Financial restatements of faulty statements negatively impact audit quality. |
| 0.866 |
|
|
|
An audit firm’s concern about its image and reputation drives higher audit quality |
|
| 0.853 |
|
|
Concern about sustaining auditee’s image or reputation stimulates higher audit quality delivery by the audit firm. |
|
| 0.847 |
|
|
The bigger an audit firm, the higher the level of its audit quality. |
|
|
| 0.840 |
|
A client’s corporate image is enhanced by the reputation of the bigger audit firm. |
|
|
| 0.757 |
|
Non-audit services lead to higher audit quality. |
|
|
|
| 0.822 |
Audit rotation improves audit quality. |
|
|
|
| 0.776 |