A Meta Analysis Approach For Determinants of Audit Quality

Journal of Accounting in Emerging Economies
A meta-analysis approach for determinants of effective factors on audit quality:

Evidence from emerging market
Mahdi Salehi, Mohamad Reza Fakhri Mahmoudi, Ali Daemi Gah,
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Mahdi Salehi, Mohamad Reza Fakhri Mahmoudi, Ali Daemi Gah, (2019) "A meta-analysis approach
for determinants of effective factors on audit quality: Evidence from emerging market", Journal of
Accounting in Emerging Economies, https://doi.org/10.1108/JAEE-03-2018-0025
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A meta-
A meta-analysis approach analysis
for determinants of effective approach
factors on audit quality

Evidence from emerging market
Mahdi Salehi
Ferdowsi University of Mashhad, Mashhad, The Islamic Republic of Iran
Mohamad Reza Fakhri Mahmoudi
Attar Institute of Higher Education, Mashhad, The Islamic Republic of Iran, and
Ali Daemi Gah

Imam Reza International University of Mashhad,
Mashhad, The Islamic Republic of Iran
Abstract
Purpose – The purpose of this paper is to demonstrate a deeper understanding about the reasons behind
difference in previous studies’ results in the field of audit quality determinants.
Design/methodology/approach – A meta-analysis method is employed in which 52 studies including 40
international studies from authentic scientific articles during the year 2000–2015 and 12 national studies out
of authentic national scientific articles from 2001 to 2015 are taken to account as sample studies. Audit firm
size, auditor tenure and auditor specialization are set as independent variables and audit quality is the only
dependent variable in the current paper.
Findings – The results indicate that audit firm size and auditor specialization are positively associated with
audit quality. In other words, contracting with larger audit firm and specialized auditor results in delivering
higher quality audit services.
Originality/value – The current study is the first study to be conducted in the field of audit quality
determinants. The results may be beneficial both for standard setters as well practitioners in a way that it
provides evidence that contributes to basis policy and audit-standard makers about domination and
determinants of audit quality.
Keywords Auditor specialization, Audit quality, Auditor tenure, Audit firm size
Paper type Research paper
Introduction
Regarding the importance of information transparency of financial statements for
decision-making purposes and the assuring role of auditors about the fairness of financial
statements, determining the effect of related factors on audit quality seems substantially
important. Exploring factors influencing audit quality can also provide some strategies for
investors that will result in rational decision making. Therefore, using the results of this study
may facilitate the process of decision making. Despite a wide and detailed literature on this issue,
there is controversy over the results of scholars that make it difficult to draw a unite conclusion.
On the other hand, an accurate single conclusion about the role of related variables in improving
the audit quality may provide better outcomes. Therefore, reviewing, combining and evaluating
of the related literature seem necessary for testing the reliability and generalizability of findings.
The main posed problem in this research is the existence of contradictory results in conducted
studies on factors that affect the audit quality which make the general conclusion difficult.
However, extensive research studies are conducted on audit quality issues (Firth et al., 2012;
Chen et al., 2005, 2010; DeAngelo, 1981; Davidson and Neu, 1993; Hasasyeganeh and Azinfar, Journal of Accounting in Emerging
Economies
2010). The results are indicative of some differences and contradictions, for example, DeAngelo © Emerald Publishing Limited
2042-1168
(1981), Davidson and Neu (1993), Francis and Yu (2009), Hay and Davis (2004), Dong Yu (2007), DOI 10.1108/JAEE-03-2018-0025
JAEE Chuntao et al. (2007), Davidson and Neu (1993), Alavi (2009), Choi, Kim, Kim and Zang (2010),
Choi, Kim, Qiu and Zang (2010) and Al-Khaddash et al. (2013). On the other hand, Bauwhede and
Willekens (2004) maintained that there is no significant relationship between the audit firms size
and audit quality. Henock (2005), James and Izien (2014), Hasasyeganeh and Azinfar (2010),
Pirri et al. (2013) declared in their studies that the audit firm size has a negative and significant
relationship with audit quality. The findings of present paper show that, considering the
economic classification (in terms of progressed, developing and emerging technology) of studied
sample, certain characteristics (audit industry specialization, audit firm size and audit tenure) are
generally associated with audit quality. Hence, the difference between certain influential
characteristics in the form of moderating variables could be the reason why there are some
differences and contradictions among the results of the studies in this field. The main goal of this
paper is to pinpoint the reasons that cause differences in the results of the previous studies
through the recognition of moderating variables of relationships between in/dependent variables
of the study and to present better conclusion of the main variables. Furthermore, investigating
the role of different type of markets (developed, developing and emerging) as a moderating
subset allows the managers and information users to make better decision in case of pointing
auditors in different countries and economic developments. Particularly, this investigation
presents a clear picture of audit quality determinants for emerging and developing markets,
since a deep comparison between these two and developed markets is provided. In this case, the
tarnished reputation of audit profession in emerging markets, caused by some low quality and
ineffective accounting firms’ services, would be recovered. Furthermore, determining the
effective factors on audit quality will result in a better appreciation by clients because of valuable
and beneficial audit services. Obviously, a better understanding of this fact will facilitate the
audit process. To achieve this goal, 52 empirical research studies on this issue are evaluated and
studied by the meta-analysis regression.
The remainder of this paper is organized as follows: reviewing the related theoretical and
practical literature and hypotheses development. Next, the meta-analysis method and its
procedure is presented; then, we present the main results and implications drawn from
statistical analyses. The last section concludes the paper and presents the concluding remarks.
Theoretical framework and hypotheses development

An auditor needs public trust when doing his/her tasks, particularly, when providing audit
service to his/her clients. It is important that financial statement users presume auditors as
an independent party having adequate experience and good accountability. This impacts on
the users’ perception about the quality of the audit services.
Regarding the importance of audit quality and its impact on financial statements
reliability, various studies are conducted about this issue and its determinants factors. Firth
et al. (2012) introduced professional qualifications and independency as two factors affecting
audit quality. As it follows, we will review some of these factors and conduct our study in
this field, separately.
Audit industry specialization

This aspect refers to special auditing skills that an audit firm has to assist the clients by
providing guidelines when facing financial crisis in desired industry as well as audit risks
(e.g. regulations, taxes, etc.). Special non-audit skills are employed and pursued through the
cooperation of the audit firm and could cause a benefit to the business of clients. Demand of
industry-specialization for audit firms is increasing in audit services markets. This may
result in a characteristic for specialization as an attempt at outcome differentiation
(Hogan and Jeter, 1999). In order to concentrate on firms in common industry, audit
firms enhance their knowledge about specific client features. Consequently, the
industry-specialization of audit firms and their expertise get higher; according to
presented explanation, one of the components of industry specialization is audit expertise. A meta-
Industry-specialization may also provide opportunities to perform high-quality services for analysis
a relatively large group of auditees with similar needs (Dunn and Mayhew, 2004). Minutti approach
(2013) concluded that audit industry-specialization could improve audit quality. Bills et al.
(2014) in their study assessed the effect of auditor’s specialty in an industry, independence
and auditor’s method for detecting fraud on a sample including 50 registered companies in
Indonesia. Their results indicate that auditor’s specialty in industry and his/her
independence have a profound impact on the implementation of auditing methods in
detecting fraud and enhancing the level of audit quality. Sun and Liu (2013) claimed that
audit industry specialization has a positive effect on the accounting quality of a company.
Industry-specialists charge, incrementally, lower fees in industries with homogenous
operations and particularly in industries with both homogenous operations and complex
accounting practices (Bills et al., 2014).
Market share also could be one of the Industry specialization measures for audit firms.
Market leaders are getting increase in their market share; therefore, this suggests that
investing in industry-specialization results in higher returns to the audit firm. This may be
result in higher fees receiving; furthermore, other benefit could be the incremental number of
clients that leads to lower fixed costs. An alternative interpretation of the increase in market
share of audit firms in certain industries is that those specialist audit firms provide higher
quality services, and therefore clients prefer to employ those specialists instead of non-
specialists (Hogan and Jeter, 1999). They also find an increase in auditor concentration, as
measured for specialization. This finding is also consistent with the hypothesis that the
increase in industry specialization results in benefits due to industry-specialists. Danos and
Eichenseher (1982) suggested that an increase in the level of specialization of an audit firm,
measured by market share, results in more favorable economies of scale for the audit firm.
Another related factor to industry-specialization is also audit fees. It is mostly perceived that
industry-specialist audit firms provide better quality services, and therefore have higher
audit fees. The study of Lowensohn et al. (2007) shows that the offered quality advantage by
audit industry-specialization does not charge higher costs to the client as it provides more
favorable economies of scale due to specialization. Mayhew and Wilkins (2003) showed that
the strong competition in the audit market leads to the sharing of the cost advantage, due to
economies of scale, for audit firms with their clients, and therefore lower audit fees than
expected arise.
Another benefit of industry specialization is the increase in disclosure quality the audit
firms provide (Dunn and Mayhew, 2004). This line of literature shows that industry-
specialists are able to apply this knowledge to provide more influential audit services as
evidenced by higher earnings quality, which could be a proxy of audit quality (Balsam et al.,
2003). The benefit is that industry-specialist audit firms gain more knowledge about a
specific industry than non-specialist audit firms do. They also have more expertise in certain
industry that is improved by sharing best practices and learning from previous services of
the clients in the same industry. Therefore, they have more abilities to recognize
misstatements, effectively.
Audit quality and audit industry specialization

Prior investigations show a positive relationship between auditor industry specialization
and audit quality (Balsam et al., 2003; Reichelt and Wang, 2010; Lowensohn et al., 2007).
Reichelt and Wang (2010) showed a sample with national and city specialists and
non-specialists. They determined the relationship between audit specialization and audit
quality through the magnitude of abnormal accruals using the Jones (1991) abnormal
accruals model, and through tolerance of aggressive earnings management by measuring
the propensity for meeting or beating analysts’ earnings forecasts by one penny per share.
JAEE They documented that lower abnormal accruals indicate higher earnings quality, as a
proxy of audit quality, and industry-specialists are less likely to meet or beat analysts’
earnings forecasts by one cent per share. Taken together, they found that industry
specialization is important for auditors to provide higher audit quality by constraining
earnings management, which means that industry expertise is positively associated with
higher audit quality. Balsam et al. (2003), Reichelt and Wang (2010) and Lowensohn et al.
(2007) found that when auditors have a large group of clients in the same industry, their
expertise increases, and this leads to higher audit quality for the group of clients in the same
year. Audit firms with industry expertise in a specific industry are more likely to detect
irregularities and misrepresentations, and therefore provide a higher audit quality (Gul et al.,
2009). In this way, audit firms meet their client needs because clients always want the best
quality for their firm. Hun-Tong and Premila (2010) investigated the association between
auditor tenure, auditor specialization and audit fee and its dependence. They showed that
auditor tenure is positively associated with auditor specialization. A longer tenure results in
increased expertise, because the auditor can gain a better understanding of the client’s
characteristics. Etemadi et al. (2010) compared the relationship between audit industry
specialization and actual profit management in listed firms in Tehran stock exchange
market. They stated that companies that are audited by specialized auditors experience a
higher actual profit management than other companies that are not audited by specialized
auditors, but their operational performance will not diminish.
Recent investigation about audit quality is presented as follow: Schneider (2017)
investigated whether knowledge about companies switching auditors from Big 4 firms to
regional firms affects commercial lending decisions. He found that neither risk assessments
nor probabilities of granting credit differed for companies that switch auditors from Big 4
firms to regional firms as compared to companies that did not switch auditors. For companies
that did switch auditors, providing a reason for the switch did not influence lending decisions.
In related investigations in emerging markets, Steenkamp (2017) conducted her study toward
risk in the South African sectional title industry in an assurance prospective. She stated that
studied industry seems to be highly regulated and the legislation regarding accounting and
auditing of sectional title is vague and ambiguous. Furthermore, she explored that there are no
industry-specific auditing and accounting standards to guide accounting and auditing
practitioners in performing their work and industry financial benchmarks are not readily
available. In addition, financial pressure on sectional title schemes is often very high because
some owners exercise unrealistic pressure to keep monthly levies as low as possible. She also
documented that all these factors have an impact on the business risk as well as audit risk of
bodies corporate. Furthermore, Almomani and Ayedh (2017) investigated the audit quality on
earnings management of industrial companies listed on the Amman Stock Exchange. Their
findings demonstrate no significant relationship between audit fees and earnings
management. Besides that, they find a significant association between Big 4 audit firms
and earnings management, which approves that audit quality has a significant effect in
interpreting earnings management. Jenkins and Thomas (2013) provided a succinct overview
of academic research that examines audit firm rotation both in the USA and in other countries.
Overall, their collective evidence indicates that, in general, earlier studies find a mixed group of
results and, in contrast, recent studies indicate that audit quality is considered as two distinct
phases during the auditor–client relationship, which are “auditor learning” and “auditor
closeness” phases. The findings of Shirinbakhsh et al. (2013) showed that auditor specialization
could bring about a higher audit quality and consequently could yield better-disclosed
information and decrease information inequality. Hasasyeganeh and Azinfar (2010) studied
the impact of audit industry specialization on reporting quality in Tehran stock market.
They found that there is no significant difference between information contents of companies
and the level of industry specialization of auditors.
Moreover, in developing countries, Hegazy et al. (2015) investigated the effect of industry A meta-
specialization on the audit quality and earnings quality in Egypt. Their findings indicate no analysis
significant difference between industry specialist auditors and non-specialists in approach
constraining earnings management. In addition, the findings support that financial
reporting quality was significantly higher when specialists conducted the audit. Finally,
they reported that auditor with industry specialization improves audit quality. Pham et al.
(2014) examined auditors’ perception of audit quality and factors influencing audit quality
in Vietnam. They also explored auditors’ opinions on factors influencing audit quality and
its dimensions. The results suggest that there are positive correlations between audit firm
size and audit quality, and industry expertise auditor and audit quality. The study also
found that employee turnover and past employment with audit client have negative effects
on audit quality in Vietnam. Ali et al. (2009) examined the relation between a company’s bid-
ask spread, a proxy for information asymmetry, and auditor tenure and specialization in
Kuwait. Their findings suggest that the market’s perception of disclosure quality is higher
and private information search opportunities are fewer for companies engaging industry
specialist auditors. In addition, the paper finds that information asymmetry has a U-shaped
relation to auditor tenure. This U-shaped relation holds for both specialists and non-
specialists; however, the bid-ask spread for specialists tends to fall below that of non-
specialists at all tenure intervals.
By reviewing the available literature about audit firm specialization, it is suggested that
many academic studies have focused on the impact of specialization on audit quality and,
interestingly, contradictory results are presented. Given the various reported results, the
first hypothesis is developed as follow:
H1. Audit industry-specialization has a positive and significant impact on the level of
audit quality.
Audit firms size

This line of literature also presents a positive association between audit firm size effect and
audit quality (Gul, 1989; Houghton et al., 2001). Arens et al. (2014) indicated that total revenues,
number of partners, number of professional staffs and number of offices determine the audit
firm size. “CPA firms’ size is a distinction of audit firm size based on mentioned categories
which leads to following classification: Big 4 international firms, national firms, regional and
large local firms, and small local firms.” Colbert et al. (1999) suggested that audit firm size is, “a
distinction of firm size based on number of CPA’s bodies, number of partners, the total number
of professional staff, and the total number of clients served by the firm.” CPA firms not only
provide attestation and assurance services but also audit services. Furthermore, CPA firms
also provide accounting and bookkeeping, taxation and management consulting services
(Arens et al., 2012). Moreover, they classify the public accountant office in the United States
according to their size, numbers: First, the Big 4 international firms that have subsets in the
United States and around the world. The Big 4 conducts audit services and other assurance
services to mostly big companies in the United States and other countries around the world.
Second, national audit firms that are also large but much smaller than the Big 4 audit. This
type of firm has an affiliation with another firm in another country and has international
capability. Third, regional and large local firms are the audit firms that have more than 100
professional staff. Some have only one office and serve clients primarily within commuting
distances. Finally, small local audit firms have fewer than 25 professionals in a single-office
firm. They perform audits and related services primarily for smaller businesses and not for
large and complex entities.
DeAngelo (1981) concluded that the size of the audit firm is a proxy for audit quality.
Dopuch and Simunic (1980) revealed that large CPA firms in order to maintain their
JAEE reputation provide high-quality services. It is likely that large audit firms avoid situations
that can destroy their independence by their individual clients compared to small audit
firms. While regulatory accounting authorities persist that audit quality does not depend on
the audit firm size, some others claim that large companies have better audit quality than
the small ones. In this regard, Riyanto (2007) suggested that the size of audit firm is used by
many research works as a proxy in order to estimate audit quality. The research indicates
empirically that there is a big distinction in audit quality between large audit firms (Big 4
audit firms) and small audit firms (non-Big 4 audit firms).
Audit quality and audit firm size

Studies conducted on the relationship between audit quality and audit firm size are typically
divided, in terms of size, into two groups: First group: those firms that are considered as big
among 8, 6 or 4 and the second group: those firms that are not considered big among 8, 6 or 4
(Elster and Toman, 2011).

Several research works examined the relationship between audit firm size and audit
quality. Choi et al. (2007) studied the effect of an audit firm size on the audit quality. They
presented that the size of an audit firm has a positive relationship with the audit quality.
The results of Sajadi and Arabi (2009) indicate that the firm size has a significant and
positive relationship with the quality of financial reporting. Moreover, in discussion on the
effect of an audit system size on audit quality, DeAngelo (1981) argued that the size of an
audit firm has a positive and significant relationship with the audit quality. In contrast to
above conclusions, some investigations including Bauwhede and Willekens (2004)
disapprove those statements; they test the effect of audit firm size on audit quality in the
Belgium market. The results of their study show no significant relationship between audit
firm size and audit quality. Ilaboya and Izien (2014) studied the effect of audit firm
characteristics on audit quality; they find that the size of an audit firm is negatively
associated with audit quality. Henock (2005) in his study examined the relationship between
the quality of an audit firm services and the audit firm size; he advocated that big audit
firms mostly provide better services than the small ones. Hasasyeganeh and Azinfar (2010)
investigated the relationship between the size of an audit firm and audit quality in Iran; they
realized that there is a significant and negative relationship between audit quality and size
of audit. Pirri et al. (2013) pointed out in their study that the size of an audit firm has a
significant and negative relationship with the audit quality.
On the other hand, there is a lot of research that supports the belief that Big 4 audit
firms perform a higher audit quality than non-Big 4 with research conducted in companies
listed on the stock market (Kim et al., 2003; Choi and Doogar, 2005; Choi, Kim, Kim and Zang,
2010; Choi, Kim, Qiu and Zang, 2010). Preliminary studies find that the Big 4 audit
firms experience infrequent litigations and are rarely penalized by the SEC (Pierre and
Andersson, 1984; Palmrose, 1988; Feroz et al., 1991). Other evidence relating to public
companies shows that the Big 4 audit firms have historically lower rates in issuing a
modified audit report (Francis and Krishnan, 1999); they report more accurately or
conservatively on companies that go bankrupt (Lennox, 1999; Choi, Kim, Kim and Zang,
2010; Choi, Kim, Qiu and Zang, 2010). Lawrence et al. (2011) showed that as large CPA
firms support training programs, standardize audit methodology and provide more
opportunity for peer review by another partner, the Big 4 companies provide higher audit
quality. Alastair et al. (2011) investigated whether they could attribute the difference of
audit quality of Big 4 companies, compared with non-Big 4 companies; according to the
characteristics of their clients, the obtained results demonstrate that the difference of
auditors is in great extent in line with the characteristics of clients, in general, and with the
client size, in particular.
In this regard, Achyarsyah and Molina (2014) examined the effect of audit firm tenure A meta-
and audit firm size on audit quality. The result of their study depicted that audit firm tenure analysis
has no significant influence on the audit quality, while audit firm size has a significant approach
influence on the audit quality. Wang et al. (2014) investigated whether the Big N audit firms
in emerging markets can provide audits of high quality and mitigate information risk, by
comparing the audit quality of Big N audit firms in Taiwan with those in China. They
evidence that Big N audit firms in Taiwan help to mitigate information asymmetry and
provide audit services of higher quality, whereas Big N firms in China are better able to
constrain earnings management. Ali et al. (2011) analyzed the effect of the length of the audit
firm-client relationship and the size of the audit firm on audit quality in Jordan. The
statistical analysis shows that audit firm tenure affects the audit quality adversely
(negatively). Audit quality deteriorates when audit firm tenure is extended as a result of the
growth in the magnitude of discretionary accruals. Meanwhile, data analysis did not reveal
that the audit firm size has any significant impact on the correlation between audit firm
tenure and audit quality.

The previously mentioned statements indicate that various contradictory remarks are
suggested about the impact of audit firm size on the audit quality. Considering these
divergent results, the second hypothesis is presented as follow:
H2. Audit firm size has a positive and significant impact on the level of audit quality.
Audit tenure
Tenure is a period of time in which the auditors are in touch with a client. This period may
affect auditor’s independence (Sinason et al., 2001). Moreover, tenure is defined as a length of
time, during which the auditor performs an evaluation in the business unit, company or a
firm (Chen et al., 2010). The economic systems are different in countries due to their
regulations, characteristics of capital market, culture and history. Conventionally, different
kinds of economic systems are divided into developed, developing, emerging and retarded.
Johnson et al. (2002) explained audit tenure as the number of consecutive years that the audit
firm (auditor) has audited the client. Furthermore, Carey and Simnett (2006) defined audit
tenure as “period of engagement” between the auditors with the client, namely the length of
the auditor on the company’s audit clients. The auditor indicates the length of their work for
clients in a matter of years. Griffin et al. (2009) defined audit tenure as “the duration of an
auditor’s works related to specific clients, in other words, the length of time an auditor is
working within a contract.” Meanwhile, Amir and Farooq (2011) defined audit tenure as “the
audit firm’s (auditor’s) total duration to hold their certain client or number of consecutive
years that the audit firm (auditor) has audited its certain client.” Ghosh and Moon (2005)
found that the increase of audit quality is associated with the length of audit tenure. This
statement suggests that audit quality can be improved by the duration of relationship
between auditors and their client. In this regard, prior literature provides two contradictory
aspects: the first one suggests that longer tenure of appointing a specific audit firm may lead
to increase the probability of undermining the objectivity of the audit services that is related
to audit independency; consequently, lower audit quality is expected. On the other hand, the
second aspect supports the longer periods of audit because a deeper understanding of
client’s business complexity is achievable after performing audit services in several periods;
thus, an improvement in audit quality is expected.
Audit quality and audit tenure

Prior literature on this context also suggests opposing results. The investigations that
find positive association include: Ball et al. (2015) studied the effect of audit tenure on
audit quality; they noted that the audit tenure has a positive impact on audit quality.
JAEE Rahmina and Agoes (2014) conducted a research about the effect of audit tenure on audit
quality. Their results demonstrate that audit tenure has a positive impact on audit quality.
Karbasi Yazdi and Chenari Bocket (2012) concluded in their study that there is a positive
relationship between audit tenure and audit quality in Tehran stock exchange market.
Bamber and Iyer (2002) found that the lengths of engagement of audit firms with its clients
are correlated to the increasingly high quality of the audit. Chi and Huang (2005) who
conducted research in Taiwan expressed a similar statement and they found evidence that
the lower earnings quality of the client occurs in the initial period of the audit assignment by
public accountant or public accounting firm. In contrast, Ball et al. (2015) studied the effect
of tenure on audit quality on 266 Australian companies and found no association between
these variables. The findings of James and Izien (2014) reveal that there is a negative
relationship between auditor tenure and audit quality. Furthermore, Pourheidari and Badri
(2013) concluded that there is a negative relationship between audit tenure and audit
quality. Rita (2012) studied the effect of audit tenure on audit quality, as well. She concluded
that audit tenure has a significant effect on audit quality. Ali et al. (2011) illustrated that
audit tenure is negatively associated with audit quality.
Further analyses in developing countries include: Pezeshkian and Hoseini (2017)
examined the effect of audit tenure and the audit firm size on the quality of audit services in
Iran. They demonstrated that auditor tenure and audit quality are significantly associated,
whereas their analyses suggest no influences of audit firm size on audit quality. Malik et al.
(2017) examined the impact of auditor tenure on audit quality. Based on their findings, it is
observed that during the early years of auditor tenure, the magnitude of discretionary
accruals increases, for the reason that the auditors are not equipped with required client-
specific knowledge. Once the auditors acquire client-specific knowledge, the magnitude of
discretionary accruals decreases, resulting in an increase in audit quality. It is also derived
that the lengthy auditor tenure does not result in a decrease in audit quality in the case of
Pakistani non-financial sector organizations. Fakhari et al. (2016) examined the association
between audit tenure and audit quality in Tehran stock exchange market. They evidenced a
significant and positive association between audit quality and auditor tenure. Kwon et al.
(2014), using a unique setting in which mandatory audit firm rotation was required from
2006–2010 and in which both audit fees and audit hours were disclosed (South Korea),
provided empirical evidence of the economic impact of this policy initiative on audit quality
and the associated implications for audit fees. Where audit firms were mandatorily rotated
post-policy, they observed that audit quality (measured as abnormal discretionary accruals)
did not significantly change compared with pre-2006 long-tenure audit situations and
voluntary post-rotation situations. Audit fees in the post-regulation period for mandatorily
rotated engagements are significantly larger than in the pre-regulation period, but are
discounted compared to audit fees for post-regulation continuing engagements. They also
found that the observed increase in audit fees and audit hours in the post-regulation period
extends beyond situations where the audit firm was mandatorily rotated, suggesting that
the introduction of mandatory audit firm rotation had a much broader impact than the
specific instances of mandatory rotation. Siregar et al. (2012) analyzed the impact of audit
tenure on audit quality. The purpose of their study is to investigate the effects of auditor
rotation and audit tenure of the public accountant and the public accounting firm on audit
quality (before and after the implementation of the mandatory auditor regulation). Their
results do not support that mandatory auditor rotation increases audit quality or that a
shorter audit tenure (both partner and firm level) increases audit quality.
Diversified documents in this line of audit literature provide incentives to develop third
hypothesis as follow:
H3. Audit tenure has a positive and significant impact on the level of audit quality.
Research methodology A meta-
The term Meta in Latin language means beyond or further. Meta has a Greek root means “on analysis
back of” or “behind” and analysis of analyses (Glass, 1976). Meta-analysis is a research approach
approach, which helps the researchers to reach an appropriate combination out of
quantitative results of previous conflicting and non-conflicting studies to describe the
contradictions and to establish moderating structural variables in the literature (Mueller
et al., 2013). In Persian, meta-analysis is a combination of two words, namely “Meta” and
“Analysis” (Houman, 2013). Effect size is a quantitative index, by which the statistical
results and findings would be summarized and consistent. Meta-analysis regression
provides paths synthesize results that lead to increase the impact, in this line of literature, of
auditing research. Latest literature reviewers believe that there is a lack of influence on
practice and public policy in auditing inquiry (e.g. Francis, 2004; DeFond and Francis, 2005;
Carcello, 2005; Kinney, 2005; Simunic, 2005; Humphrey, 2008). In this regard, it is stated that
inconsistency in findings over different studies with the same objectives is the reason
behind that ineffectiveness (Carcello, 2005). In fact, these different findings typically arise
from employing different samples over countries with different regulatory, different models
with various measurement and different variable definitions. In order to provide more
reliable and practical results, meta-analysis regression synthesizes the contradictor findings
of auditing research and shows an overall conclusion about the results of research in which
mixed results were presented. This statistical approach also provides documents about the
alternative explanations for the results of previous studies in auditing literature.
In this paper, meta-regression is used, preceded by the examination of a funnel plot. The
funnel plot is a preliminary approach to examine the effect of publication bias (Egger et al.,
1997; Sutton et al., 2000; Stanley et al., 2008) in a way that effect size is plotted against precision
(defined as 1 divided by standard error). The effect size means the amount of impact of
independence variable on dependent one. This concept was defined for the first time in 1977 by
Kohen and since then is used extensively. The effect size is known as the key element of meta-
analysis method in a way that excluding it would make the implementation of method
impossible. The aim of using and calculating the effect size is to unify various statistical
findings of studies into a shared numerical index to make the comparison and synthesis
possible (Entezari and Mehri, 2013). Measuring indices of the effect size are divided into two
groups based on group differences (d) which are mainly for measuring standard differences
between mean quantities and correlation indices (r) which are mostly the Pearson correlation
coefficient. Regarding the performed evaluations, all conducted accounting studies by the
meta-analysis method have used the correlation indices of the effect size. All conducted
accounting studies using the meta-analysis method (Keef and Roush, 2007; Khlif and Souissi,
2010; Ahmed et al., 2013) employed the effect size index of “r” for the evaluation of correlation
relationships among variables. Accordingly, this paper utilized the same index for the
evaluation of correlation relationship between audit quality and its contributing factors, as
well, which is in fact Pearson linear coefficient effect (r) among the variables.
In meta-analysis regressions, publication bias is a growing concern. Since authors, reviewers
and editors all are interested in significant results, there is more possibility that a researcher will
lose the incentives to work on a study that does not find significant results. As a consequent, it
is extensively thought that studies with statistically significant results are much more likely to
be published than those with “no results” (e.g. Stanley et al., 2008). The implication of this issue
suggests that the inclusive published results overstate the existing effects because of the
inherent publication bias. Therefore, a misleadingly overstated view of the premium may be
provided by the published research. Earlier papers (e.g. Lindsay, 1994) have discussed
publication bias in accounting research. Lindsay (1994) believed that publication bias
slows down the progress of accounting research. This is constant with the argument that “the
placement of the first research bricks affected the whole wall” initial studies of an issue in
JAEE accounting are very influential and there are barriers to publishing work that challenges
previous published accounting research (Bamber et al., 2000). In this regard, Pomeroy and
Thornton (2008) argued that “prior research suggests that publication bias is particularly acute
in accounting.” It is also notable that publication bias will be expected because the research
results show systematically different results for more exact studies than for less exact studies.
We further explore the issue of publication bias by including similar measures of dependent
and independent variables. On the one hand, these measures might result in higher quality
research; but, on the other hand, they might also provide greater pressure to produce significant
results and thus greater publication bias. In conclusion, examining these issues helps to
investigate the incidence of publication bias as well as its extent.
Statistical sample and population

In order to run a meta-analysis, the first step is to locate relevant studies through manual
and online databases of scientific searches. We applied various combinations of related

words to search in commonly available online literature databases, such as “audit quality,”
“firm size,” “auditor specialization” and “auditor (partner) tenure.” The carried out searches
start from 2000 to 2015 among the articles published in the national and international
journals as the statistical sample. We also scanned the references in studies presented in
computer searches to find out additional investigation in related literature. The following
criteria are taken into full consideration for published papers in which empirical archival
studies should meet them in order to be included in the meta-analysis. The abnormal
(discretionary) accrual, audit opinion, audit fee (in order to alleviate the effect of SOX act’s
effect, only observations in USA and after 2002 is considered as a proxy of audit quality),
audit firm size and disclosure quality must be the measurements of dependent variable as a
proxy for audit quality. The independent variables of studies must be audit industry
specialization, audit firm size and auditor tenure. The population includes all types of
markets (start from emerging into developed markets). It is noted that differentiating
between various economic classes is done based on periodically reports of United Nation.
The Pearson linear correlation coefficient must be applied or any other statistics that are
convertible to the Pearson linear correlation coefficient and must be presented in the paper.
The included studies must be accepted and published in an authentic journal. It is notable
that studies that do not have at least one out of five above requirements are excluded.
Finally, we select 52 studies in the meta-analysis considering the above criteria that are
presented in Table I. Then, the consensus method is applied as a statistical unit of the study.
Various results obtained from the same study are integrated to meet the independent
sample requirement for meta-analysis. We also exclude a large number of studies from the
meta-analysis since they do not fulfill the criteria named above.
Research variables
In this research, audit quality is a dependent variable and audit industry specialization,
audit firm size, and audit tenure are considered as independent variables.
Data collection and analysis methods

In meta-analysis method, researchers initially calculate statistics ( χ2, p-value, F, Z and t)
which indicate correlation among variables. After extraction, using the following formulas
the above-mentioned reported statistics will be converted to the effect size of (r) (Lipsey and
Wilson, 2001):
t
r ¼ pffiffiffiffiffiffiffiffiffiffiffiffiffi ; (1)
t þdf
2
No. Study Country Year Dependent variable Independent variable
1 Carey and Simnett (2006) Australia 1995 Accruals Audit tenure

2 Colbert and Murray (1998) USA 1996 Peer review Auditor size
3 Caramanis and Spathis (2006) Greece 2001 Auditor opinion Auditor size
4 Jenkins et al. (2006) USA 2004 Audit fee Specialist auditors
5 Sundgren and Svanström (2013) Norway 2006 Accruals Audit tenure
6 Beck and Wu (2010) USA 2006 Audit fee Specialist auditors
7 Svanberg and Öhman (2014) Sweden 2011 Accruals Audit tenure
8 Hegazy et al. (2015) Egypt 2012 Auditor opinion Specialist auditors
9 Pham et al. (2014) Vietnam 2014 Auditor opinion Audit tenure
10 Glover et al. (2015) USA 2015 Accruals Audit tenure
11 Bartov et al. (2000) USA 1973–1980 Auditor opinion Auditor size
12 Hogan and Jeter (1999) USA 1976–1993 Audit size Specialist auditors
13 Deis and Giroux (1992) USA 1984–1989 Audit size Audit tenure
14 Johnson et al. (2002) USA 1986–1995 Accruals Audit tenure
15 Lennox (1999) UK 1987–1994 Auditor accuracy Auditor size
16 Mascarenhas et al. (2010) USA 1989–2006 Accruals Specialist auditors
17 Krishnan (2003) USA 1989–98 Accruals Specialist auditors
18 Kimberly and Brian (2004) USA 1990–1991 disclosure quality Specialist auditors
19 Mayhew and Wilkins (2003) USA 1997–2003 Audit fee Specialist auditors
20 Balsam et al. (2003) USA 1991–99 Accruals Specialist auditors
21 Chen et al. (2013) Taiwan 1992–2006 Accruals Auditor size
22 Velury et al. (2003) USA 1994–1996 Accruals Specialist auditors
23 Bauwhede and Willekens (2004) Belgium 1994–1996 Accruals Auditor size
24 Jackson et al. (2008) Australia 1995–2003 Auditor opinion Audit tenure
25 Geiger and Raghunandan (2002) USA 1996–1998 Auditor opinion Audit tenure
26 Chi and Huang (2005) Taiwan 1998–2001 Accruals Audit tenure
27 Firth et al. (2007) China 1998–2003 Accruals Auditor size
28 Jaggi and Leung (2007) Hong Kong 1999–2000 Accruals Auditor size
29 Chen et al. (2005) Taiwan 1999–2002 Accruals Specialist auditors
30 Sánchez-Ballesta and García-Meca (2005) Spain 1999–2002 Auditor opinion Auditor size
31 Chen et al. (2005) Taiwan 1999–2002 Accruals Auditor size
32 Causholli et al. (2014) USA 2000–2001 Accruals Audit tenure
33 Gul et al. (2007) USA 2000–2001 Accruals Audit tenure
(continued )
approach
analysis
A meta-
Included studies into

meta-analysis
Table I.
JAEE
Table I.
No. Study Country Year Dependent variable Independent variable
34 Cormier and Martinez (2006) France 2000–2002 Accruals Auditor size

35 Stanley and DeZoort (2007) USA 2000–2004 Audit fee Audit tenure
36 Chen et al. (2013) China 2000–2006 Accruals Auditor size
37 Lim and Tan (2010) Korea 2000–2007 Accruals Audit tenure
38 Hasasyeganeh and Azinfar (2010) Iran 2001–2003 Accruals Auditor size
39 Chuntao et al. (2007) China 2001–2003 Auditor opinion Auditor size
40 Rashidah and Fairuzana (2006) Malaysia 2002–2003 Accruals Auditor size
41 Ali et al. (2011) Jordan 2002–2006 Accruals Audit tenure
42 Etemadi et al. (2010) Iran 2002–2007 Accruals Specialist auditors
43 Kim and Yang (2014) Korea 2002–2011 Accruals Audit tenure
44 Li et al. (2010) China 2004–2007 Accruals Auditor size
45 Ahsan and Borhan (2011) New Zealand 2004–2008 Auditor opinion Specialist auditors
46 Fodio et al. (2013) Nigeria 2007–2010 Accruals Auditor size
47 Zhou (2015) China 2007–2012 Small profits Auditor size
48 Martinez and Moraes (2014) Brazil 2009–2012 Accruals Auditor size
49 Ali and Aulia (2015) Indonesia 2010-2012 Accruals Auditor size
50 Myers et al. (2003) USA N/A Disclosure quality Audit tenure
51 Hay and Jeter (2011) New Zealand N/A Audit size Specialist auditors
52 Sirois et al. (2011) USA N/A Audit technology Auditor size
rffiffiffiffiffi A meta-
x2 analysis
r¼ ; (2)
n approach
pffiffiffiffi
F
r¼ p ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
ffi; (3)
F þn1 þn2 2
where n is the sample volume of each study. Effect size formulas for the index of “d” are as
follows:
2t
d ¼ pffiffiffiffiffi; (4)
df
pffiffiffiffi
2 F
d¼ ; (5)
df
2r
d ¼ pffiffiffiffiffiffiffiffiffi: (6)
1=r 2
Next, the mean effect size should be calculated. The calculation of arithmetic mean is
possible when the frequency of correlation coefficients is normal; however, regarding the
normal status, the effect sizes should be converted to “Z Fisher” using the following formula:

1 þr
Z r ¼ 0:5log e : (7)
1r
In order to define the type and direction of relationships between variables, the following
formula is applied in an appropriate confidence interval:
zr za=2 dðzr Þpzp pzr þza=2 dðzr Þ; (8)
X
N
H¼ ðni 3Þðzri zr Þ2 : (9)
i¼1
The steps to determine the homogeneity of coefficient are as follows: first, the H-value
obtained from the above formula is compared with the critical value of the χ2 with df ¼ K−1.
If H is smaller than the critical value of the table, the homogeneity of coefficient hypothesis
is confirmed. If the H-value is more than the critical value of the table, the homogeneity of
coefficient hypothesis is rejected.
Empirical results
The obtained results from applying the meta-analysis method on total statistical population,
including national and international studies, are presented in Table II. The table reports the
results of conducted meta-analysis on total concluded studies with any variable and the
results in each category with moderator variables, separately.
JAEE Sample Number of Mean Confidence interval Statistics χ2 critical
Variable volume (n) studies (k) (Z r) 95% lowest/highest (h) value
(A) Audit industry 106,249 14 0.0085 0.003 27.255 22.362

specialization 0.014
Discretionary accruals 96,946 6 0.003 0.002 4.69 12.6
−0.009
Audit fee 1,468 3 0.033 −0.018 4.64 5.99
0.084
Other quality criteria 7,835 5 0.011 −0.011 7.97 7.81
0.011
Developed 123,530 11 0.006 −0.012 23.9 18.3
−0.001
Developing 702 1 0.055 −0.129 – –
0.019
Emerging 530 2 0.054 −0.032 3.76 3.84

0.14
(B) Audit firm size 143,237 21 0.0272 0.022 591.662 31.4104
0.032
Discretionary accruals 122,245 13 −0.025 −0.03 0.4 14.07
−0.19
Auditor opinion 11,597 4 0.01 −0.028 60.45 9.49
0.008
Other quality criteria 5,866 4 0.047 0.022 59.1 9.49
0.073
Developed 105,144 7 0.0156 −0.022 331.171 12.591
−0.01
Developing 20,748 10 0.0016 −0.015 277.202 16.919
0.012
Emerging 17,381 4 0.0158 −0.031 65.7 7.815
−0.001
(C) Auditor tenure 90,564 17 0.0054 −0.0011 171.962 26.29
0.012
Discretionary accruals 17,800 11 0.021 0.006 42.57 9.49
0.036
Auditor opinion 52,679 3 0.001 −0.007 92.92 5.99
0.01
Other criteria 5,072 3 0.009 −0.019 23.41 9.49
0.036
Developed 63,271 12 0.0016 −0.006 117.478 19.675
0.009
Developing 27,150 4 0.024 −0.013 39.339 7.815
Table II. 0.036
The statistical results Emerging 143 1 0.101 −0.065 – –
of meta-analysis 0.266
Audit quality
In this meta-analysis, we review the relationships between audit quality and several
attributes of audit quality generally investigated in previous studies. Balsam et al. (2003)
suggested that since auditor quality is multidimensional and inherently unobservable, no
single auditor characteristic can be used to proxy for it. The role of auditing in proving the
quality of financial statements is highly remarkable due to recent corporate accounting
scandals and the extension of international trading. The quality of auditor reports is
commonly different from the offered credibility by the auditors and in the financial
statements quality of the audit clients.
Audit industry specialization A meta-
From the 52 available studies in the sample, only 14 investigations selected audit industry analysis
specialization and evaluated its relationship with audit quality. Excepting audit firm approach
reputation, Balsam et al. (2003), Chen et al. (2005) and Gul et al. (2009) argued that an
industry specialist auditor offers a higher level of assurance than does a non-specialist
because of the specialist auditor’s knowledge of the industry and its accounting procedures.
Consequently, the use of an auditor with industry specialization will help to improve
audit quality.
Table II part (A) illustrates the results of meta-analysis of these 14 studies. A positive
confidence interval is obtained from these studies (0.003 and 0.014) which generally
indicates a positive relationship between audit industry specialization and audit quality.
Accordingly, audit industry specialization has a positive effect on audit quality. The results
of congruence test among studies (27.255) substantiate the incongruity. Furthermore, after
dividing the 14 conducted studies into the sub-groups of audit quality measurements
(discretionary accruals (6) and other audit quality criteria (8) studies), the obtained
confidence interval shows that audit quality and audit industry specialization are not
significantly associated. The results suggest that the measurement of audit quality is one of
the most important influential items on the conducted studies.
The studies are classified according to countries classification (economic levels;
developed (11), developing (1) and emerging (2)). The result of confidence interval (−0.012,
−0.001) suggests a negative relationship between audit industry specialization and audit
quality in developed countries. For developing countries, the obtained confidence interval
(−0.129, 0.019) indicates no significant relationship between these two variables, and for
emerging countries, the obtained confidence interval (−0.032, 0.140) also recommends no
significant relationship between these two variables. Concerning types of economic systems
in countries and since the calculated confidence intervals shows no significant relationship
between audit quality and audit industry specialization, it is notable that these factors
(developed, developing and emerging countries) play no indicative role in the relationship
between these two variables. Regarding the provided results, the first research hypothesis
generally suggests a significant association at 5 percent level, indicating that expert
auditor of an industry provides high-quality audit services. Moreover, the economic
classification of countries does not statistically moderate the relationship between audit
industry specialization and audit quality. Finally, the results suggest that administered
congruence tests in some levels including discretionary accruals (4.96), auditor payment
(4.64) and emerging countries (3.76) are approved.
Audit firm size

Several investigations examine whether audit firm size (Big 6/5/4) is related with earnings
quality. For example, Becker et al. (1998) and Francis and Krishnan (1999) argued that Big 6
auditors are better able to detect earnings management because of their superior knowledge
and act to keep in check earnings management. In this context, their findings suggest that
bigger audit firms show incentives to improve the audit quality in order to protect their
reputation due to their larger client base.
The meta-analysis results presented in Table II part (B) show that from the total
available studies in the sample, 21 investigations are specified for the association between
audit firm size and audit quality. Generally, the obtained positive confidence level (0.022,
0.032) reveals a positive relationship between audit firm size and audit quality. As expected,
the results of meta-analysis mean that large audit firms, besides, not only have more
resources and expertise to detect miss reporting but also have greater incentives to maintain
their high-level quality. The empirical result of the congruence test among studies (591/662)
indicates the incongruity. After dividing the 21 conducted studies into the sub-groups
JAEE related to audit quality measurements and economic status of countries, all employed
proxies for audit quality are discretionary accrual. Respectively, the obtained confidence
interval of discretionary accrual has a negative association, auditor opinion has no
association and auditor payment and other criteria have a significant and positive
relationship between the levels of audit quality and audit firm size. Then we carried out the
meta-analysis method concerning the next sub-group related to economic status. Among
investigations related to audit firm size, respectively, (7) and (4) studies are conducted in
developed and emerging economics, and the results document a negative relationship
between audit firm size and audit quality in both markets type. On the other side, the
obtained confidence interval determines no significant relationship between two mentioned
variables of (10) studies in developing countries. Since, the obtained confidence intervals
indicate a negative and no significant relationship between audit quality and the audit firm
size, it is notable that the economic classification (including developed, developing and
emerging countries) plays no moderating role in association between these two variables.
The conducted congruence test in sub-groups is still indicative of no congruity and

uniformity; therefore, we cannot integrate the studies in the sub-groups (except in
discretionary accrual).
Auditor tenure
The existing literature regarding the effectiveness of auditor tenure on audit quality
explores that auditor independence decreases as the length of auditor tenure increases (Beck
et al., 1988; Lys and Watts, 1994). Consequently, the impaired independency results in poor
audit quality. In this regard, Myers et al. (2003) and Yang and Krishnan (2005) reported a
significant negative relationship between auditor tenure and earnings management because
of low-quality audit services. In contrast, others claim that an increase in auditor tenure
results in better assessing risk of material misstatements by auditors, which is a consequent
of gaining experience and better insights into the client’s operations and business strategies
as well internal controls over financial reporting (e.g. Arens et al., 2005).
The remaining of study reports the results of our final investigation part (C) including 17
studies reported in Table II, in which the effect of auditor tenure on audit quality is
examined. Regarding the figures of Table II, the obtained confidence interval (−0.0011,
0.012) generally indicates no significant relationship between auditor tenure and audit
quality. This means that the auditor’s tenure has no significant effect on audit quality, in
general. The calculated mean for all studies (0.0054) reveals that in most studies a positive
correlation coefficient is reported between auditor tenure and audit quality. The congruence
test suggests no congruity (171/962) among the studies, as well. After dividing the 17
conducted studies into sub-groups related to audit quality and economic status of countries,
the audit quality is divided further into sub-groups of discretionary accrual (5), fraudulent
reporting (4), type of opinion (3) and other quality criteria (5) studies. The calculated
confidence interval for discretionary accrual and fraudulent reporting indicates a positive
relationship for the type of opinion and other quality criteria reveals no significant
relationship between variables. After dividing the 17 conducted studies into sub-groups
related to the economic status of countries, the resultant confidence interval of this sub-
group (−0.006, 0.009) and the sub-group of emerging countries (−0.065, 0.266) suggests no
significant relationship between auditor tenure and audit quality. In contrast, 4 conducted
studies in developing countries with a positive confidence interval (0.013, 0.036) suggest a
positive relationship between two mentioned variables. Given the obtained results, the third
research hypothesis assesses no association between the effects of auditor tenure on audit
quality levels. In terms of the economic status of countries, since a positive relationship is
observed in developing countries, it is observed that the type of economic classification
plays a mitigating role in the relationship between audit quality and auditor tenure.
Moreover, results suggest no significant relationship in developed and emerging markets. A meta-
The administered congruence test in all sub-groups (except fraudulent reporting) is still analysis
suggesting incongruity. Therefore, it is not possible to integrate the studies. Due to the lack approach
of required sample, the congruence test is not feasible in the emerging countries. Given the
obtained results, the third research hypothesis generally is not significant at 5 percent level.
Further discussion
Earnings management is a remarkably important consideration to corporate stakeholders;
in response, it is expected that independent audit service warrants this important issue. The
existing theory in this regard notions that when the auditor provides a better quality audit
service, earning management is less likely. Despite the importance of the issue, empirical
evidence on the effect of audit quality and earning management is not clear. In this regard,
Jerry and Hwang (2010) conducted a meta-analysis on the issue of audit quality, corporate
governance, and earnings management. The ultimate selection (after excluding some
studies because of employing inconsistent variables) includes 48 papers in their meta-

analysis. Using the Stouffer combined test, their meta-analysis has identified consistent
effects of a large number of audit quality and earning management variables. Consistent to
our results, which suggest a positive association between audit industry specialization and
audit quality, their findings suggest a significant negative relationship between earnings
management and use of industry specialist auditor. Altogether, the existing evidence in this
line of literature concludes that specialist auditors in an industry uncover more earning
management, and consequently, present higher quality independent audit services.
In line with our expectations and findings (positive relationship between audit firm size
and audit quality) on the effectiveness of audit firm size, their meta-analysis results show a
significant negative relationship between the use of Big 6/5/4 auditors and earnings
management. These evidences comprise that larger audit firms have sufficient inventive
(includes preserving their reputation, litigation risks avoidance, maintaining existing and
extending the range of their clients) to improve (or maintain) the level of their services’
quality. Moreover, Alareeni (2017) examined similar association in a meta-analysis; he also
found that the relationship between audit firm size and audit quality is a significant
negative relationship for discretionary accruals and abnormal accruals. Their further
conclusion suggests that the relationship remains significant for developing countries group
and not significant for the developed countries group. Therefore, he found a moderating role
for countries classification, while our results evidence no moderating role in this context.
The various conclusions may be raised of different studies number consideration.
The ultimate comparison is conducted about the influential role of auditor–client tenure.
Generally, our investigation evidences no association between auditor tenure and audit
quality, while Jerry and Hwang (2010) indicated that auditor tenure has a significant
negative relationship with earnings management. According to countries classification, the
results of Alareeni’s (2017) investigation conclude significant association for developed and
developing countries groups for their negative relationship. Inconsistent with their findings,
we document a positive effect of auditor–client tenure on audit quality only in developing
countries. The theoretical justification for various conclusions is unclear direction of prior
findings in this line of literature.
Conclusion
In this paper, we test the research hypotheses using the meta-analysis regression method to
the results of auditing research, specifically, influential items on audit quality. A meta-analysis
regression expands the existing literature in a field of study that is usually used in auditing
research. It provides the examination of additional issues including the publication bias
outcomes and multivariate analysis of study characteristics. A meta-analysis regression also
JAEE provides examination of the research setting including period, country and private or public
sector that may not take into full consideration by original papers.
Considering the first research hypothesis, the audit quality is divided into three sub-
groups including discretionary accrual, auditor payment and other quality criteria. The
calculated confidence interval revealed no significant relationship between different classes
of audit quality and audit industry specialization. The conducted congruence test on the
audit quality and audit industry specialization is not significant, while the sub-groups
approve the test, which is indicative of integration possibility in the sub-groups. In the next
stage, we evaluate the moderating role in the relationship between classification based on
economic status of countries (developed, developing, and emerging countries) and audit
industry specialization and audit quality. The presented results of this hypothesis suggest a
positive relationship between these two variables, in general. But by considering the
economic status of countries, obtained confidence intervals indicate no significant
relationship between audit quality and audit industry specialization; therefore, it is stated
that these factors (developed, developing, emerging countries) play no moderating role in
the relationships of these two variables. In other words, the first research hypothesis is
generally significant, but it is rejected in levels related to economic status of countries. The
conducted congruence test in economic levels is only confirmed in emerging countries and
made the integration of studies in this level possible. The results of first hypothesis are in
line with the results of Hegazy et al. (2015), Pham et al. (2014), Minutti (2013), Sun and Liu
(2013), Shirinbakhsh et al. (2013) and Ali et al. (2009), and in contrast to the findings of
Hasasyeganeh and Azinfar (2010) and Etemadi et al. (2010). The cause of existence of
conflicting results could be the different status of audit firms.
The obtained results of the second hypothesis on relationships between the size
of an audit firm and audit quality imply that generally these two variables are positively
associated. Furthermore, the results of congruence test confirmed the incongruity.
We divided the conducted studies on audit quality into four sub-groups including:
discretionary accrual, type of auditor opinion, auditor payment, and other quality criteria.
The obtained confidence interval of discretionary accrual confirmed a negative impact, type
of auditor opinion has no impact, and auditor payment and other quality criteria show a
significant and positive impact on the relationship between the level of audit quality and
audit firm size. According to the economic status of countries results, it is obtained that
confidence interval is negative which indicates no significant relationship between audit
quality and audit firm size; therefore, we can conclude that these factors (developed,
developing and emerging countries) play no moderating role in the relationships of these
two variables. The conducted congruence test in sub-groups indicates no congruity, as well.
Thus, it is not possible to integrate the studies in categories (except in discretionary accrual).
The results of the second hypothesis are in line with the findings of Achyarsyah and
Molina (2014), Wang et al. (2014), Al-Khaddash et al. (2013), Francis and Yu (2009), DeAngelo
(1981) and Alavi (2009), and are in contrast with the findings of James
and Izien (2014), Ali et al. (2011), Hasasyeganeh and Azinfar (2010), Henock (2005) and
Bauwhede and Willekens (2004).
The obtained results of the third hypothesis on relationships between the auditor tenure
and audit quality illustrate that there is no significant relationship between these two
variables, in general. The results of congruence test confirmed the incongruity. We divided
the 17 conducted studies on audit quality into four sub-groups of discretionary accrual,
fraudulent reporting, type of comment, and other quality criteria. The obtained confidence
interval of discretionary accrual and fraudulent reporting confirms a positive relationship,
and type of auditor opinion and other quality criteria show no significant relationship.
In terms of the economic status of countries, since we observe a positive relationship in
developing countries, no significant relationship is reported in developed and emerging
countries, so type of economic status of countries affects the relationship between the audit A meta-
quality and auditor tenure and plays a moderating role. The conducted congruence test in analysis
all sub-groups (except fraudulent reporting) still insists on incongruity. Accordingly, the approach
third research hypothesis on the positive relationship between auditor tenure and audit
quality is accepted, in general. In sub-group section, however, only the developing countries
are acceptable. The results of the third hypothesis are in line with the findings of Malik et al.
(2017), Pezeshkian and Hoseini (2017), Fakhari et al. (2016), Sheri and Moghadam (2006),
Ali et al. (2011), and Pourheidari and Badri (2013) and in contrast with findings of Ball et al.
(2015), Rahmina and Agoes (2014), Kwon et al. (2014), Achyarsyah and Molina (2014), and
Karbasi Yazdi and Chenari Bocket (2012), Siregar et al. (2012), and Ali et al. (2011). It is noted
that the auditing fragile which is raised of poor legal protection and ineffective regulatory in
emerging and developing countries is not recorded separately. The selected sample of this
study almost investigated the legal economic activities of the markets.
This paper provides evidence that contributes to policy and audit-standard makers
about domination and determinants of audit quality. Since meta-analysis provides more
reliable and accurate results, concerning our findings, they can provide regularities and
standards that are more efficient for audit practitioners in order to achieve audit objectives
in developed countries. Furthermore, the statistical population includes papers from
emerging to developed markets, and considering our results, it is observable that economic
levels have no impact on determinants factors of audit quality. Hence, the results provide a
guidance for under-developing countries in which the path of development is as same as
what developed countries have passed. Since financial regulations are inefficient in
emerging markets, using the outcome of this study, lawmakers may apply the effective
principles of developed countries as a foundation for localizing these principles in
accordance with their social needs.
In line with almost identical investigations, the limitations of current paper comprise
relatively a few number of related published research papers (52 papers) in this line of
literature. An extra limitation is the inability of concerning changes in regularities and
standards over time, such as changes in corporate governance during the different periods.
Since the meta-analysis regression can help to provide more specified conclusions, and
reduce the effects of publication bias, it is highly recommended to develop meta-analysis
regression, in other critical and ambiguous areas of auditing (such as the incidence of going
concern opinions or the determinants items of audit fee), for future studies which may
provide guidance for policy makers. Future research may also extend to other areas where
other audit professional services provide useful information. Since meta-analysis
regression has potential ability to synthesize various results of investigations in auditing,
its conclusions may have greater influence on expected policies. Therefore, researchers
have a plenty of opportunities for applying meta-analysis regression in auditing and
accounting research.
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Corresponding author
Mahdi Salehi can be contacted at: mehdi.salehi@um.ac.ir
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A Meta Analysis Approach For Determinants of Audit Quality

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Journal of Accounting in Emerging Economies

A meta-analysis approach for determinants of effective factors on audit quality:

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factors on audit quality

Ali Daemi Gah

Theoretical framework and hypotheses development

Audit industry specialization

Audit quality and audit industry specialization

Audit firms size

Audit quality and audit firm size

(Elster and Toman, 2011).

tenure and audit quality.

Audit quality and audit tenure

Statistical sample and population

and online databases of scientific searches. We applied various combinations of related

Data collection and analysis methods

No. Study Country Year Dependent variable Independent variable

1 Carey and Simnett (2006) Australia 1995 Accruals Audit tenure

Included studies into

34 Cormier and Martinez (2006) France 2000–2002 Accruals Auditor size

zr za=2 dðzr Þpzp pzr þza=2 dðzr Þ; (8)

(A) Audit industry 106,249 14 0.0085 0.003 27.255 22.362

Emerging 530 2 0.054 −0.032 3.76 3.84

Audit firm size

The conducted congruence test in sub-groups is still indicative of no congruity and

studies because of employing inconsistent variables) includes 48 papers in their meta-

Accounting, Vol. 6 No. 22, pp. 1-14.

Information Science and Engineering, Vol. 29 No. 3, pp. 734-764

Review of Integrated Business Economic Research, Vol. 3 No. 1, pp. 237-256.

Montreal, pp.cd-rom, 2012. hal-00691147.

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