http://www.loc.gov/mods/v3 http://www.loc.gov/standards/mods/v3/mods-3-2.xsd
empirical investigation of the determinants of reporting quality and the effectiveness of the quality review program for small accounting firms
Critics of the accounting profession have not spared the self-regulatory program of accounting firms. Some of these criticisms suggest that the profession's present self-regulatory program is so unsatisfactory that another form of regulation should be adopted. The Public Oversight Board of the AICPA notes that the self-regulatory process can, and must, do more than it does now. This study assesses the potential usefulness of the literature's surrogates for audit quality as appropriate determinants of reporting quality for small accounting firms. In this study, small firms are defined as being non-AICPA member firms. In addition, the effectiveness of the quality review program for these firms is addressed. Data for the study comes from the quality reviews of non-AICPA member accounting firms licensed to practice in the State of Arkansas during the years 1989-1991. The results of this study suggest that the model presented, if used correctly, has the ability to predict reporting quality (compliance with GAAS) such that reviewers in the quality review program can identify accounting firm characteristics, as well as client characteristics, which may be associated with reporting deficiencies in their selection of engagements to be examined. Specifically, size of the client (as measured by the percentage of revenue for the accounting firm provided by the client under review), the number of professional staff with the accounting firm under review, the lack of independence (as measured by the fact that the accounting firm is owed fees for more than one year), and the complexity of the engagement (as measured by whether the client is in a highly regulated industry with unusual reporting requirements) all relate to reporting quality. The results also suggest that when addressing the effectiveness of the quality review program, the firms which receive a substandard review tend to receive an acceptable review in the follow-up review. This study extends the literature on reporting quality and the effectiveness of the quality review program by developing a model which combines several measures of audit quality into a meaningful predictive model for reporting quality. In addition, it examines the quality review program as it relates to small accounting firms rather than those within the membership of the AICPA.