Skip to main content
Unpublished Paper
Demand for and Assessment of Audit Quality in the Market for Private Capital: A Field Study
  • Shyam Sunder
An organization’s demand for auditing is believed to be driven by regulation intended to protect third-party interests, especially those of shareholders and creditors. There is little agreement on what audit quality is. In this field study of private companies, we conduct interviews to learn about various sources of demand for audits, and criteria to assess their quality. Our study reveals several additional sources of unregulated demand from both internal agents (boards and employees) as well as external agents (customers, suppliers, bonding agencies, and other regulators). We also find that users assess audit quality based on auditor’s accounting expertise, presentation of financial statements, absence of errors, fee, connectivity in the business community, and on internal control and general business advice. Users are also interested in audit procedures, risk assessments and how they spent their time. Interestingly, regulators of public company audits discourage or prohibit the advisory functions and expansive reporting valued by private company users, for the fear of undermining audit independence and quality. Contrary to claims about the efficacy of audits, users remain skeptical of audited financial statements and put only limited reliance on them. Keywords: Sources of demand for audits, regulation 
  • Sources of demand for audits,
  • regulation of audits,
  • auditor selection,
  • audit quality
Publication Date
August 1, 2016
Citation Information
Shyam Sunder. "Demand for and Assessment of Audit Quality in the Market for Private Capital: A Field Study" (2016)
Available at: