Megan Jones

Date of Graduation


Document Type


Degree Type



College of Business and Economics



Committee Chair

Scott Fleming

Committee Co-Chair

Lisa Dilks

Committee Member

Kip Holderness

Committee Member

Richard Riley


This dissertation is comprised of three studies that examine characteristics that have the potential to influence auditors' ability to detect material misstatement and therefore, audit quality.;The first study examines the Public Company Accounting Oversight Board (PCAOB) inspection process, and its relation to audit quality. This archival study concentrates on the group of companies that hire audit firms after Part II inspection reports containing quality control criticisms are made public. Results suggest that companies that switch to auditors with Part II reports have lower audit quality than companies that switch to auditors without Part II reports. Further, companies that switch to Part II report auditors do not appear to negotiate lower fees. This demonstrates an unintended consequence of Part II inspection reports. It is possible that some companies are using the reports to identify low-quality auditors that may be less likely to detect material misstatement.;The second study focuses on the influence of auditor substitution on professional skepticism. Staffing changes are necessary in practice due to auditor turnover and changes in client timing, which may result in a substitute auditor completing a task that is already started. The skepticism level may be lower for a substitute auditor compared to an auditor completing an entire task due to lack of information or lower feelings of meaningfulness and psychological ownership of the task. An experiment was conducted with professional accountants demonstrating that substitute auditors were less skeptical than auditors completing an entire task from start to finish. Evidence does not support that substitute auditors had lower feelings of meaningfulness and psychological ownership resulting in lower skepticism. However, results do suggest that substitute auditors are less skeptical in their judgment because red flags were not all transferred. This lower skeptical judgment then led to less skeptical action by the substitute auditors. The decline in skepticism may harm substitute auditors' ability to detect material misstatement.;Lastly, study three focuses on how fraud inquiries of management are conducted. The audit standards include inquiries of management that mention the word fraud and are closed type questions. However, the Center for Audit Quality (CAQ) recommends avoiding the word fraud when having conversations with management regarding fraud risks. Also, the CAQ recommends questions that are all open-ended type. This study aims to explore whether slight changes in the verbiage of management inquiries could increase the likelihood fraud reporting to inquiring auditors. Results from an experiment using Amazon Mechanical Turk participants indicates that avoiding the word fraud increases the likelihood of reporting when closed type questions are used and the auditor lacks rapport with the client. Practically, this suggests that auditors lacking rapport with the client and using the inquiries from the standards (closed type questions which mention the word fraud), may be able to increase the likelihood of reporting by simply avoiding the word fraud. If clients are willing to share fraud risks, auditors would be in a better position to adjust the audit plan, and hopefully, have a better chance of detecting material misstatement due to fraud.