Exploring the Influence of Audit Firm Reputation on Stakeholder Trust and Financial Reporting Accuracy

Posted: May 28, 2023

• Molly Ortiz
• Gracie Turner
• Oliver Webb

Abstract

The role of audit firms in financial markets extends beyond technical verification of financial statements to encompass broader institutional functions that maintain market confidence and facilitate capital allocation. While substantial research has examined audit quality determinants, the specific mechanisms through which audit firm reputation influences stakeholder trust and financial reporting accuracy remain inadequately theorized and empirically tested. Traditional approaches have typically conceptualized reputation as a unidimensional construct primarily reflecting technical competence, overlooking the complex interplay between perceived ethical standing, historical performance, and social capital that collectively constitute reputation in professional service contexts. This study addresses critical gaps in the literature by developing and testing a comprehensive theoretical framework that conceptualizes audit firm reputation as a multi-faceted construct with distinct dimensions that differentially influence stakeholder perceptions and financial reporting outcomes.