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This is a study regarding to the evaluation of audit firms'quality conducted by the Securities and Exchange Commision (SEC); The research is to find the quality surrogates and use them to measure the qualities of the thirty-six audit firms that were rated as "good" firms. The audit quality surrogates consist of two groups : one relates to the auditor's credibility including auditor reputation and disciplinary actions; the other relates to client characteristics. The data include questionnaires and other empirical data. The statistical methods have Chi-square test, Spearman Rank Correlation, and Logit Regression Model.
The results are summarized as follows:
A. Auditor credibility
1. Auditor reputation survey: Generally, the qualities of the good firms acquire much more recognition than other firms. Furthermore, the Big-six firms among these "good" firms acquire the highest valuation.
2. Disciplinary actions: This surrogate has no significant relation with the evaluation result. It does not suggest much difference on the auditor disciplinary records between the good firms and other firms.
B. Client characteristics:
Client characteristics of "good" and other firms are significant different. Moreover, the difference is also significant between the Big-six audit firms' clients and other firms' clients.
In general, the audit qualities of the thirty-six good firms are better than other firms. However, the qualities of the thirty-six good audit firms are not homogeneous.
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