An Empirical Analysis of Audit Quality Determinants in Emerging Financial Markets

Posted: Aug 31, 2022

• Bennett Carter
• Hugo Campbell
• Avery Mason

Abstract

The globalization of financial markets has intensified the need for high-quality auditing across diverse economic contexts, particularly in emerging markets where institutional frameworks are still evolving. While extensive research exists on audit quality determinants in developed economies, the unique characteristics of emerging financial markets—including varying levels of institutional development, regulatory enforcement capacity, and cultural influences—necessitate a specialized investigation. This paper addresses this critical gap by conducting a comprehensive empirical analysis of audit quality determinants across 45 emerging markets over a thirteen-year period from 2010 to 2022. Emerging financial markets present a compelling research context due to their distinctive institutional configurations. These markets often exhibit rapid growth trajectories coupled with institutional voids that create both challenges and opportunities for audit quality development. The complex interplay between formal regulatory structures and informal governance mechanisms in these environments remains underexplored in the extant literature. Furthermore, the transplantation of international auditing standards into diverse local contexts raises important questions about the contextual factors that mediate their effectiveness.