Research Highlights

Audit quality refers to the effectiveness, reliability, and integrity of audits performed by audit firms. Traditionally, firm size has been used as a proxy for audit quality. Larger audit firms typically serve a wide client base and face greater reputational and financial risks in the event of audit failures. Consequently, they are generally expected to exercise higher levels of diligence and professional scrutiny when conducting audits and issuing opinions on financial statements.

However, experience shows that firm size alone does not guarantee audit quality. Several large firms have, over time, been associated with audit deficiencies, regulatory sanctions, and investor litigation, highlighting limitations in relying solely on size as an indicator of performance.

In contrast, many small and medium-sized audit firms demonstrate strong commitment to delivering high-quality services, particularly for key clients. Their focused approach can enable closer client engagement and greater attention to audit processes.

This research provides a comparative analysis of audit quality across firms of different sizes, considering client economic significance. The findings offer valuable insights for investors, regulators, corporations, and graduates, supporting informed decision-making in investment, oversight, auditor selection, and career planning.