Exploration of audit quality disclosures contained in the transparency reports of audit firms

Raphadu, Mpya Aaron
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Purpose: The purpose of this study is to explore the disclosure practices of audit firms issued in the transparency reports. This study uses audit quality standards to assess how disclosures regarding audit quality have been included in the audit transparency reports. Methodology: This study analysed the publicly available transparency reports of the big 4 audit firms and medium audit firms. These reports were analysed following an interpretive approach to determining the extent of disclosure on audit quality from 2016 to 2020. This study also considered the change in disclosure on audit quality over these five years. A disclosure checklist has been developed using professional literature. Content analysis has been used to codify the disclosed information with disclosures being scored using an ordinal scale. Descriptive statistics have been used to analyse and graphically present the data. Findings: The findings suggest inconsistencies in the preparation of the transparency reports. The number of disclosures did not increase significantly from 2016 to 2020, even though there was increased public scrutiny of the audit firms in the wake of audit failures over the same period. Additionally, the big 4 audit firms provided more disclosures compared to medium-tier firms. Research limitations: The research is limited to the publicly available transparency reports and, therefore, the findings are not representative of all assurance providers in the South African market Practical implications: The findings can be used to aid audit regulators in understanding inconsistencies in audit firm transparency reports to develop assurance reporting frameworks. Additionally, the findings can inform regulators of these reporting issues about audit quality indicators. Value: This study complements the current research by providing insight into audit firms' disclosure practices in audit transparency reports. Current research has been focussed on corporate governance-specific disclosures.
A research report submitted partial fulfilment of the requirements for the degree of Master of Commerce to the Faculty of Commerce, Law and Management, Wits School of Accountancy, at the University of the Witwatersrand, Johannesburg, 2023