05 Nov 2025
Recently, the paper titled “The Role of Pre-Audit Financial Reporting Quality in Detecting Audit Quality: Implications for Sample Selection” by Assistant Professor Jin Jiang, from the Department of Accounting at the International Business School Suzhou (IBSS), Xi’an Jiaotong-Liverpool University (XJTLU), was accepted for publication in Auditing: A Journal of Practice & Theory (ABDC-A*). This study makes a significant contribution to our understanding of how appropriate sample selection shapes empirical research on audit quality, with a particular focus on how pre-audit financial reporting quality (FRQ) affects the ability to detect audit quality.
This study develops a new proxy for clients’ pre-audit FRQ and partitions the full sample into subsamples based on this measure to underscore the importance of appropriate sample selection in audit quality research. By leveraging reviewed but unaudited year-to-date third-quarter (Q3) financial data from U.S. publicly listed companies to estimate pre-audit FRQ, the authors provide initial evidence that the effectiveness of audit quality indicators—specifically Big 4 affiliation and auditor industry specialisation—is concentrated among clients with low pre-audit FRQ. In these subsamples, auditors are more likely to make observable improvements in post-audit FRQ, as measured by discretionary accruals and financial statement restatements.
This study makes several important contributions. Firstly, it highlights the critical role of clients’ pre-audit FRQ in empirical assessments of audit quality. By partitioning the sample based on pre-audit FRQ, the study reveals that the ability to detect audit quality is contingent on the client’s initial reporting quality. This finding underscores the methodological importance of focusing on clients with lower pre-audit FRQ, where auditors’ contributions are more readily identifiable. This proposed approach offers a novel empirical strategy that facilitates a more nuanced assessment of audit quality by accounting for variation in clients’ initial reporting quality. A practical implication of this study is that future research may benefit from adopting this stratification approach to identify contexts in which audit quality is more likely to be economically meaningful and relevant to market participants.
Dr Jin Jiang is an Assistant Professor in the Department of Accounting at IBSS, XJTLU. Her main research interests include auditing, corporate governance, and capital markets. She has published several papers in leading international journals, such as Auditing: A Journal of Practice and Theory (ABDC-A*), Journal of International Accounting, Auditing and Taxation (ABS-3), Corporate Governance: An International Review (ABS-3), Journal of Financial Stability (ABS-3), The International Journal of Accounting (ABS-3) and Accounting Horizon (ABS-3), etc.
Auditing: A Journal of Practice & Theory aims to contribute to improving the practice and theory of auditing. The term “auditing” is to be interpreted broadly and encompasses internal and external auditing as well as other attestation activities (phenomena). Papers reporting results of original research that embody improvements in auditing theory or auditing methodology are the central focus of this journal. An essential objective of AJPT is to promote communication between research and practice.
05 Nov 2025