Keywords
Quality, Audit, integrity
Abstract
Auditing plays a vital role in reducing both: information asymmetry by empirically confi rming the validity of fi nancial statements and agency problems. The principal- agent confl ict illustrated in agency theory, where principal (owner) lack reasons to believe their agents (managers) because of information asymmetries and contradictory motives. Information asymmetry deals with the study of decisions in transactions where one party has more or superior information than other. Agents (either directors or auditors) may be trustworthy without further incentives to align interest or monitoring strategies such as audit or increased regulation. However, the simple agency model would recommend that agents are untrustworthy because managers, auditors will have their own interests and motives. Independent auditor from the board of directors is of huge importance to shareholders and key factor to deliver high audit quality. International Standards on Auditing (IAS) deals with the overall objectives set out for an independent auditor with its nature and scope allowing the independent auditor to meet these objectives in terms of conducting the audit of fi nancial statements.
Audit evidence which refers to the information used by the auditors in order to reach certain conclusion on the basis of which audit opinion is formulated. Audit evidence is formulated on the basis of information from both the accounting records in the fi nancial statements and the other information concerning the entity.
Professional judgment that is required in an audit by the IAS refers to the application of relevant training, knowledge and experience in an audit engagement with in the specifi ed context of auditing, accounting and ethical standards, in a way to smoothen the economic decision making regarding the courses of action that are feasible to the circumstances of the audit engagement.
Quality control procedures should be taken into consideration during the audit engagement level which could provide the auditor with reasonable assurance regarding the compliance of audit with the professional standards and applicable legal and regulatory requirements; and report issued by the auditor is under appropriate circumstances.
Kosovo ranks to be one of the small countries in the Balcan region. Taking the history of business establishments in Kosovo into consideration, we see that the corporate enterprises in Kosovo are relatively new. Thus, it was by the end of nineteenth century when debates and discussions started to breakout regarding the revision of the laws concerning audit of the fi rms.
Recommended Citation
Berisha, Burim Isa BB
(2025)
"Agency Theory and Audit Quality,"
International Journal of Business and Technology: Vol. 11:
Iss.
5, Article 1.
Available at:
https://knowledgecenter.ubt-uni.net/ijbte/vol11/iss5/1
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