This study aims to examine the impact of adopting the International Standard on Auditing (ISA) 701 on audit quality (AQ) across different economic contexts. It assesses whether the standard has effectively enhanced the informational value and reliability of audit reports for publicly listed companies.
This study adopts a quantitative approach using a panel data set of publicly listed companies in both developed and emerging markets. The AQ indicators are compared before and after the implementation of ISA 701, allowing for an assessment of the standard’s effectiveness across distinct regulatory environments.
The results show that ISA 701 adoption has not yet fully achieved its objective of enhancing AQ on a global scale. Although improvements are observed, AQ in emerging markets remains lower than that in developed markets. However, these markets have shown relatively greater improvements post adoption, suggesting that ISA 701 has helped increase audit rigor in markets where institutional frameworks are less mature.
The findings support the continued promotion of ISA 701 and highlight the need for complementary reforms in emerging markets to ensure that the standard reaches its full potential in enhancing AQ.
This study is one of the first, to the best of the authors’ knowledge, large-scale comparative assessments of ISA 701’s implementation effects across different economic contexts. This contributes to the understanding of how global audit standards perform in practice and identifies opportunities to strengthen their effectiveness, particularly in emerging markets.
