IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 22, Issue 2. Ser. II (February. 2020), PP 56-66 www.iosrjournals.org DOI: 10.9790/487X-2202025666 www.iosrjournals.org 56 | Page Audit Quality: A Literature Overview and Research Synthesis Khaled Isam AL-Qatamin 1 , Zalailah Salleh 2 , Research Scholar, Universiti Malaysia Terengganu, (Malaysia) 1 , Associate Professor, Universiti Malaysia Terengganu(Malaysia) 2 . Department of Accounting and Finance, Universiti Malaysia Terengganu (UMT), Malaysia Abstract: The paper aim is to evaluate the current literature on audit quality. To satisfy the aim, the author carries out a secondary research in which past research on the topic has been evaluated and the following findings have been found. for this, the author has considered 1981 to present as a relevant period for conducting this research. Additionally, “audit quality”, “definition”, “processes”, “inputs”, “audit evidence”, and factor related search terms have been used for obtaining the required data. Firstly, there is no universal definition of audit quality as different authors have separately defined it. Secondly, the author has summarized various indicators of audit quality after establishing the audit quality framework. Here, it is necessary to mention that there are various local and international jurisdictions that are applicable and followed by various local and international firms. At the same time, various audit quality indicators are important to assess how they are linked to audit quality. For example, professional skepticism is one the important input indicators that is highly essential to determine audit quality. Key words: audit quality; audit quality indicators; premature sing-off; PCAOB synthesis. --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 21-01-2020 Date of Acceptance: 11-02-2020 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Audit quality retains a positive and strong relationship with the degree of confidence of various stakeholders. There are various stakeholders who are directly or indirectly related or affected by the audit quality of financial statements. If a company receives various audit quality notes where auditors have raised a number of questions relating to various controls and audit procedures, this would severely affect the audit quality and it would also compel many stakeholders to determine their future relationship with that company. Since many stakeholders do not just want to see an unqualified audit opinion, but they also expect an appropriate level of audit quality as approved and highlighted by auditors. In other words, if an auditors issues a qualified audit report, this would create various challenges for the company’s management, their strategic and operational decisions relating to finance, debt management, sales, marketing, human resources and all other related departments. Therefore, each stakeholder has its own concerns and expectations from the financial and operational performance of audited financial statements. Creditors make their lending decisions when they overview the audited financial statements of their client. For example, if a company’s audit quality is below their benchmark for extending loan or credit facility to their clients, this would not allow them to maintaining the same sort of credit relationship with their client. When a company receives a qualified audit opinion, this unequivocally represents that the company has failed to meet their financial goals. And when a company is unable to perform effectively, this means it is highly likely that the company would not be able to avoid the problem of liquidity crisis or working capital challenges. Therefore, for a creditor, it would seriously affect the ability of their client to timely pay back their debt. Since the company is experiencing the effects of liquidity shortage, the chances of bankruptcy cannot be ruled out. Therefore, audit quality is important for creditors. Shareholders’ confidence is also reliant on audit quality. directors retain an agency relationship with their shareholders as the former is legally and ethical bound to make informed business decisions that maximize the shareholders’ wealth not only in the short run but also in the long run. In other words, it would not be incorrect to say that directors are required to satisfy the expectations of their shareholders and the best and effective way is to increase and maintain an attractive financial performance and financial stability of the company. And, this can only be reflected through audit quality and the audit report issued by independent audit firm. If an audit firm issues an unqualified audit report, this would reflect the audit quality of that compan y’s financial statements. As a result, shareholders would be in a position to retain their level of trust on their directors’ ability to increase the wealth of their shareholders.