Measuring audit quality in an era of change: An empirical investigation of UK audit market stakeholders in 2002 and 2005

The purpose of this paper is to consider changing perceptions of audit quality in the UK during a period of significant environmental change. The views of three audit stakeholder groups of auditors (n=109 and 183), auditees (n=75 and 121), and investors (n=74 and 111) are considered.

The paper uses survey data collected in February 2005, comparing results to a dataset gathered in February 2002, coincident with the Enron/Andersen debacle. Three issues are addressed. First, the construct validity of scale scores is assessed. Second, the measurement equivalence between the three groups is considered. Third, an assessment of group differences and differences attributable to time of administration is undertaken.

Results identify that audit quality is defined by four higher‐order factors labeled competence, independence, relationship, and service qualities. Confirmatory factor analyses indicated measurement equivalence across groups drawn from the three samples and two time periods. Contrary to expectations, mean scores on the “technical” audit factors (competence, relationship, and independence) fell from 2002 to 2005. However, as expected, no change in service qualities mean scores was identified across the period.

The paper assesses stakeholder attitudes at a time when the UK audit environment has undergone significant change between the 2002 and 2005 administrations of the instrument.