But as it grew, supervisors did not always ensure that the work done there was of high quality, auditors found.
To tackle quality issues, Gamesa now has three to five quality auditors at every supplier's manufacturing location.
More specifically, we explore (a) the efficacy in identifying low quality auditors and (b) the effectiveness in enhancing the quality of subsequent statutory audits of the sanctioned auditors.
Second, we find evidence that firms in higher agency cost settings respond by having their financial statements audited by a higher-quality auditor (i.e., a Big 4 firm).
DeFond and Lennox (2011) conclude that low-quality auditors are more likely to receive external reports comprising quality deficiencies than high-quality auditors are.
Archival data also illustrates the efficacy of inspections in identifying low-quality auditors.
Low-quality auditors also exhibit greater propensity to reformulate the annual accounts.
Similar to the PCAOB inspection program, we expect the external ICAC investigations to be effective in identifying low-quality auditors.
In this regard, DeFond and Lennox (2011) report that low-quality auditors are more likely to receive external reports comprising quality deficiencies.
In particular, we evaluate (a) the efficacy of the external supervisory board in identifying low-quality auditors and (b) the effectiveness of the disciplinary system in improving the quality of subsequent statutory audits performed by the sanctioned auditors.
Subsequently, in a meeting with F.D.A. officials, Healy candidly acknowledged widespread "infrastructure, quality and auditor problems," including a headquarters computer system that periodically "lost functionality," according to an affidavit in the court file.
