Mismatched perceptions of audit quality: Strategic responses of New Zealand auditors’ to regulators and audit committees Event as iCalendar

(Accounting and Finance)

26 November 2018

11am - 12:30pm

Venue: The University of Auckland Business School, Level 3, Room 317, 12 Grafton Road, Auckland, 1010

Presenter: Debbie Alexander, University of Auckland

Conversations with auditors, regulators and the audit committee members indicate tension in the relations between these stakeholders. Auditors may comply with the regulators’ views on audit quality due to fear of enforcement meanwhile questioning aspects of the inspection process and its expectations. This negative environment can lead to the undermining of the legitimacy of auditors, lowering the profitability of audit firms, losing auditors from the profession and harming the trust in the regulator (Knechel 2016). Implications of the perceived costs outweighing the benefits could ultimately decrease the regulators’ coercive power and reduce auditor compliance (Johnson et al. 2017).

Recently introduced audit regulation in New Zealand, the Auditor Regulation Act (2011), aims to improve audit quality. This exogenous shock destabilizes the acceptability of current practices (Greenwood et al. 2002), requiring the need to change as auditors’ legitimacy is under pressure (Oliver 1992). However, defining and measuring audit quality is difficult and is still debated. Consequently, research anticipates a mismatch of audit quality perceptions within an audit engagement. This study aims to (1) verify the differences in audit quality perceptions of the three stakeholders, (2) understand the nature of the tension due to this mismatch of audit quality, and (3) identify the strategic responses of the auditors to this inspection gap. Ultimately, the purpose is to close the inspection gap, restore trust in the regulators and improve the legitimacy of auditors (Dowling, Knechel and Moroney 2018).

Viewing the semi-structured interview data and applicable documentation through the theoretical lens of institutional theory and Oliver’s (1991) typology of strategies, this research adds to the scholarly conversation around the impact of regulation on audit quality. This qualitative study complements archival and experimental research designs. Investigating multiple regulatory efforts at once (Libby, Rennekamp and Seybert 2015; Cooper and Robson 2006), within a unique co-regulatory environment, provides an opportunity to explore the impact of regulation on audit quality within a distinctive domestic institutional context (Canning and O'Dwyer 2016). 

The findings have implications for regulators and researchers interested in understanding behavioural factors that may influence regulatory compliance. Overall, this research contributes to the ongoing debate concerning auditor oversight efficacy and audit quality which is of interest to both regulators and those being regulated (Canning and O'Dwyer 2016).

Debbie Alexander is a PhD candidate with the Accounting and Finance Department at The University of Auckland. She has been a senior tutor in the department for the past sixteen years. Debbie completed her Master of Commerce Degree in 2009 at The University of Auckland. Debbie regularly reviews papers for the Managerial Auditing Journal, Pacific Accounting Review and Meditari Accountancy Research.  


  • de Villiers, C., & Alexander, D. (2014). The institutionalisation of corporate social responsibility reporting. The British Accounting Review, 46(2), 198-212. 
  • Alexander, D., & Hay, D. (2013). The effects of recurring and non-recurring non-audit services on auditor independence. Managerial Auditing Journal, 28(5), 407-425.

For more information contact:
John Lee
Email: byong.lee@auckland.ac.nz
Ext. 85171