Audit quality, Audit Committee effectiveness and Audit evaluation: A critical Literature Review

Abstract

There have been growing academic research and literature on audit quality in corporate organisations but increase in financial and accounting scandals has brought the integrity of financial reporting and audit quality in disrepute. Questions have arisen on the independence of the auditor and quality of audits conducted for public interest organisations. Audit quality is critical in the financial reporting chain and investors and other audit stakeholders require assurance on the quality of the audit reports, financial reporting disclosures and information on the performance of firms. This paper seeks to review literature on audit quality to establish how audit quality is affected by audit committee effectiveness and audit evaluation. The study involves critical review of academic literature and research on audit quality, audit committee effectiveness and audit evaluation including related theories and empirical studies which investigates the relationship among audit quality, audit committee effectiveness, and audit evaluation. Review findings reveal that there is no agreeable audit quality framework, definition of audit quality and information on how audit committee effectiveness affects audit quality. Independence of the AC, qualification of members reflected on the knowledge and expertise possessed and size of the committee are believed to improve financial reporting quality resulting in high audit quality. AC’s frequency of meetings, contributions reflected in committee minutes, informal relationships between the committee and stakeholders such as internal and external auditors; and seniormanagement improves audit quality in organizations