Business, Management and Accounting
4 years ago

Boosting Audit Quality: Shifting Accountability from Managers to Investors Pays Off

The Accounting Review
Realigning Auditors' Accountability: Experimental Evidence
Patrick J. Hurley, Brian W. Mayhew, Kara M. Obermire

Paper Summary

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The study looked at how changing who hires auditors and who they are accountable to affects audit quality. By making auditors accountable to investors instead of managers, audit quality improved. Even when auditors were hired by a third party, the quality of audits increased. When auditor accuracy was considered in the hiring process, audit quality was even higher. This shows that changing auditors' accountability can make audits better.