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  • Writer's pictureDaniel Goelzer

What Do Clients Want from Auditors? Is it the Same as What Investors Want?

In What Do Audit Clients Want from Their Auditor?, Brant Christensen (Brigham Young University), Matthew Ege and Nathan Sharp (both of Texas A&M University), and T. Jeffrey Wilks (Brigham Young University) report the results of a survey and interviews with public company executives and directors about what they want from their external auditor. Their findings suggest that executives and audit committee members may value different auditor attributes than those that investors presumably favor. 


The participants in the study were chief financial officers, chief accounting officers, and directors of U.S. public companies. The authors received survey responses from 171 executives and 76 directors.  Sixty-one percent of the executives were CFOs or CAOs, and 51 percent of the directors were audit committee members. The authors conducted 14 follow-up interviews five with directors and nine with executives.


The authors describe four “key takeaways” from their research:


  • Executives and directors view auditors’ service quality as at least as important as technical competence or compliance with auditing standards. “Both directors and executives emphasize the need for audit firms, partners, and teams to be strong communicators who raise issues in a timely manner to avoid surprises.”  As the study notes, a preference for service quality over audit quality “is likely inconsistent with what regulators, investors, and creditors want from auditors.”


  • Executives particularly value an audit partner’s willingness to be flexible in areas involving subjective judgment, “such as determining whether a misstatement is material or whether a control deficiency is a material weakness.”  Executives also value a partner’s willingness to make decisions without involving the audit firm’s national office.  Director respondents placed less weight on these attributes.  The authors observe that a preference for partner flexibility and autonomy “might not be in the best interest of investors if that judgment is used to record transactions in ways that do not faithfully represent the underlying economics of the transactions.”


  • Approximately 40 percent of respondents are unable to assess audit quality very accurately.  For example, there was a “wide range of responses when participants are asked to provide their perception of the level of assurance the typical audit provides.”


  • Participants generally prefer the status quo when asked about potential changes to the audit process. In addition, “participants generally report satisfaction with their current auditor and the level of assurance received, in part because switching costs are high and exceed the benefits obtained from audits that are viewed by some as compliance exercises that resemble a commodity.”


The paper’s abstract concludes: “These results raise questions about whether executives’ and directors’ focus on service quality and flexibility aligns with investors’ needs and, separately, whether regulators’ focus on quality and compliance meets executives’ and directors’ needs.”  In evaluating auditor performance, audit committees may want to keep the implications of these differences in perspective in mind. 

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