This document is a project proposal for a research study on factors affecting the quality of audit reports in Australian commercial banks. The proposal outlines the problem statement, research objectives and questions, justification for the study, and expected outcomes. It presents a conceptual framework relating internal control, firm size, auditor independence, auditor qualification, and industry specialization to audit quality. The methodology involves a qualitative literature review from academic journals and bank financial reports. Hypotheses are developed to test whether the factors affect audit quality. The proposal also includes sections on research methodology, data analysis, variables, study organization, budget, and references.

1. BUSN20016 Project Proposal
BUSN20016 Project Proposal
RESEARCH IN BUSINESS- BUSN20016, Term-1, 2018
ASSESSMENT- 3
Project Title: Factors Affecting Quality of Audit Reports in
Australian Commercial Banks
NAME OF THE STUDENT:
Student ID :
Tutor’s name :
Course Lecturer :
Campus : Central Queensland
University, Sydney Campus
ASSESSMENT SHEET
Criteria
Total Marks
Marks Obtained
Overall Comments
A statement of the problem, research aim, objectives and
research questions
Justification and potential output of the research
Conceptual framework
Methodology, organization of the study, project budget and
schedule
Accurate referencing, use of correct English and logical
sequences between sentences and paragraphs and a good
introduction

2. 10
10
10
10
10
Total
50
Mark reduction for Turnitin similarity (It's up to the markers
and unit coordinator's judgment)
Mark reduction for late submission(5% mark reduction for each
day of late submission)
Grand Total= 50
Key to grading and corresponding marking scale:
HD (42.5 and above out of 50 marks): Student demonstrates
outstanding understanding and interpretation of all aspects of
the criteria.
D (37.25 to 42.24 out of 50 marks): Student demonstrates
excellence in understanding and interpretation of almost all
aspects of the criteria with some minor corrections or additions
needed.
C (32.25 to 37.24 marks out of 50 marks): Student demonstrates
very good understanding and interpretation of most aspects of
the criteria with some need for additional work, additions or
improvement.
P (24.75% to 32.24% marks): Student demonstrates good
understanding and interpretation of the criteria to warrant the

3. award of a Pass but requires considerable additional work,
additions or improvement.
F (below 24.7%): Student demonstrates an unsatisfactory
understanding and interpretation of the criteria and requires
major additional work, additions or improvement to achieve a
passing grade.
June, 2018
Contents
Introduction 3
Statement of the Problem 4
Research Objectives/Questions 4
Justification of the Project 5
Expected Research output/Outcome 5
Conceptual Framework 7
Hypothesis Testing: 8
Research Methodology 8
Qualitative data Analysis: 9
Data Series and Survey/ Interview Questionnaire: 9
Sampling Design and Data Analysis: 9
Research Variables: 9
Organization of the Study 10
GANTT CHART 10
Project Budget and Budget Justification 11
References 12
Appendix 14
Introduction
Financial Statements are relevant and potential factors to
change management decisions including manager’s day to day
operational decisions. Truthful decision and guidance of
management demotes information asymmetry and meliorates the
reputation of firm for transparent and credible reporting (Mei,
Chan, & McVay, 2009). Auditors articulate a judgment to

4. ensure fairness of financial statements. Acquiring assurance
from financial statements users that data are being reported,
appropriately deliberated, and evenhandedly presented is
important. To increase the dependency of decision makers on
pertinent, unbiased and truthful audited financial statements and
auditor’s report, auditors have to elevate their skill proficiency.
Apart from this, internal control system of company is another
factor to affect the quality of Audit reports. However, few
regulators from small audit firms deny the statement that size of
audit firm affects the audit quality (Husam, Rana, & Abdulhadi,
2013).
Although, wide researches have been conducted, there is no
exact definition of Audit Quality available (Dunakhir, 2016).
This research aims to determine the factors affecting quality of
Audit reports in Australian Banking. The structure of this
research assignment is as follows:
This introduction here forming section 1 and followed by
problem statement, research objectives, justification of the
proposed proposal, and expected outcome that also falls under
section 2 and 3 After that section 4 is conceptual framework
which is followed by Methodology, section 5 And finally
section 6 comprises Organization of the study, Gantt chart and
budget required to complete the required proposal.
Statement of the Problem
Quality of Audit can be defined as the concerted probability
that an accessible material error can be perceived and then
reported by an Auditor (Prawitt, Smith, & Wood, 2008). And
that corporate report is one of the vital objectives of corporate
reporting that helps users to make decisions. Similarly, auditors
play very important role in the encouragement of Public
companies and for the development of financial market. In
addition to this auditors increase confidence between firm and
existing and prospective investors by creating independent
opinion to demonstrate true and fair financial picture of the
company. So, financial regulators of whole globe always

5. endeavor for the Auditors’ quality reports (Shahzada, Pouwa,
Rubbaniy, & El-Temtamy, 2017). As the competition between
commercial banks is intense, managers of commercial banks
must be concerned to quality reports to improve their
performance. Similarly, it leads them to seek for the higher
level of audit quality for their performance appraisal. In
addition to this, practical concentration on Audit reports may
help managers to connect their theoretical ideas with real
practice (Al-Khaddash, Al Nawas, & Ramadan, 2013).
Wide research has been conducted but there isn’t exact Audit
Quality definition available (Dunakhir, 2016). But, Audit
Quality is one of the most influencing factors to determine the
performance of firms and impels potentials investors. In an
ideal scenario, Quality Audit always restrains the earning image
and fairness of firms’ financial activity (Reza & Quraishi,
2015).
Therefore, this research task intents to demonstrate those
factors affecting quality of Audit reports. In this research, the
targeted area is Australian Banking industry that to check what
factors are affecting their Quality Audit Reports.Research
Objectives/Questions
The Aim of the study is to determine and analyzing the factors
affecting Audit Quality reports. Besides this, it will focus on
Australian banks for analysis. For this research several journal
articles published based on Audit Quality reports will be taken
and referred.
Further, it will be concentrated on finding out what exact
factors are affecting the Quality of Audit Reports in this sector.
Basically, it will try to seek how Internal control, Firm Size and
Auditor’s reputation, Auditor’s independence, Auditor
Qualifications and proficiency and Industry specialization affect
Audit Quality. For this task, Articles and academic research for
the past period of ten years will be taken and will assay to
detect the answer of the following questions:
1. How Auditor Qualification affects the quality of Audit

6. reports?
2. What is the role of internal control to influence quality of
Audit report?
3. How important Auditor’s independency is for quality audit
reports?
4. Do firm Size and Auditors’ reputation affect Audit Quality?
5. How industry specialization determines Audit Quality?
These questions aim to answer the research objective that what
factors are affecting audit quality and how is their influence is
seen in Audit Quality.Justification of the Project
After examining the several journal articles, it can be seen that
many researchers have contributed their time and proficiency to
articulate their finding upon quality audit reports. But, the
bankruptcy of Enron and Arthur Andersen, it is being in vogue
to comment and making questions to Quality of Audit being
prepared by accounting firms. Meanwhile, criticism is made
with the reports of big 4 accounting firms- Deloitte, Ernst and
Young, PwC and KPMG (Francis, 2010). After this incident,
Accounting bodies and policy makers are getting pressure for
better corporate management for the implementation and
initiation for the practice of better corporate governance
practice (Habib & Azim, 2008). So, this project report will try
to articulate how given factors are responsible to maintain audit
quality in Australian Banks and will adjudicate to supply
essential information on research gap. Expected Research
output/Outcome
The resolution of this research will demonstrate how factors
affecting audit quality are responsible to change the quality or
output of the audit. Companies’ policy and procedure to ensure
financial integrity and accounting information are subjected to
meet firms’ operational and profitability with transmitting
policies of management is known as internal control (University
of Washington, 2015). This process is affected by entire body
including BOD, management and personnel of the
organizations. A body from BOD to ensure appropriate financial
reporting and disclosure is conducted inside the firm (Ahmed &

7. Che-Ahmad, 2016). Independent and well structured
documented process to gather audit evidence and for its
objective assessment the quality of Audit must be ensured for
verifying fulfillment of audit criteria. While assuring quality
financial reporting and corporate accountability, it also
functions as governance mechanism under legal proceeding
responsibly (Godwin & Schmulow, 2015). Since Audit
committees are designed with the independent directors, those
directors can better make enquiry for the depth and breadth
inside the internal auditing function (IAF) activities that results
improved quality of the organization Audit function. Similarly,
Directors of independent nature automatically more objective in
evaluating the audit concerns that are later subjected to
International Standards for the Professional practice of internal
Auditing (ISPPIA) and their concerns with the IAF. Then, it
obviously leads to the promotion of higher audit correspondence
associated with implication and adoption of standards
referencing independent Audit committee. So, it can be said that
firms having high quality audit committee will possesses strong
internal control that obviously leads to higher quality audit. The
point to be noted is that issue of Auditor independence is very
crucial to regulators and standard setters (Carson, Fargher, &
Zhang, 2016).
Similarly, as compared to small firms, larger Audit firm
possesses fewer incentives for compromising their standard to
maintain client retention. Also, larger audit firms generally
colligate with more accurate information than smaller firms
(Alzeban, 20105). As a result they can provide high quality
audit. It is anticipated that Big-4 and non-Big-4 audit firms
dissent in terms of their audit qualities and implementation
capacities. However, the grounds encouraging the deviation in
audit qualities between Big-4 and non-Big-4 auditors do not
mandatorily connote that, inside the group, quality of audit of
different big-4 auditors are same. It means, inside Big-4
auditors, single auditor may possess basically various qualities
and enforcement aptitude. Big-4 auditors’ enforcement

8. capabilities and non-Big-4 auditors’ enforcement capabilities
also may vary significantly. The bankruptcy of the leading
corporate giants such as Enron, HIH, and Tyco at the onset of
the current decade and the synchronal financial crisis
throughout the world, vibrating the execution of the companies
disregarding of their auditors’ quality, motivates public to raise
questions about the qualities of the audit firms (Bepari &
Mollik, 2015).
Moreover, Independent Audit committee escalates the external
auditors’ independence and assures that management does not
try to influence activities of Auditors to result their
transparency on material statement without any delays.
According to Wright and Wright [1997], auditor independence
is at the core of the moral soundness of an audit process. If
Auditors and clients start negotiate and make issues of financial
reporting, asserting the wholeness of the independent audit
activities is obligatory to auditors and it is requisite condition
to validate standard of the Accounting Profession (ADEYEMI,
OKPALA, & DABOR, 2012).
As per DeAngelo[1981], Auditor’s report must be dislodged
from material misstatement and it should discover any breaches
or error in the statement. This is very important to develop fair
Auditing and to acquire Quality Audit. For this purpose,
auditors must have management, leadership proficiencies.
Similarly, workforce plan, staff management, technical
capabilities with required education, working experience,
certification of Auditor, social science and scientific
investigation expertise, and other distinctive qualification must
be possessed by Auditors to enhance quality Audit reports.
Besides this, As per DeAngelo “External stakeholders such as
investors and regulators use audited financial statement
information in their decision making. Because investors are
unable to directly observe audit quality and determine whether
the reported information is an unbiased indicator of firms'
financial performance, auditor reputation serves as an important
proxy for the quality and accuracy of client financial

9. statements”.
Also, Auditors who possesses industry ad hoc expertise are
finer armored to notice faults or retardations than those auditors
without such skills. Carcello and Nagy [2004] came to know
that auditors’ industry expertise mitigate financial fraud.
Similarly, Solomon et al [1999] propounded that Specialist
Auditors possesses more cognition of non-error frequency
compared to the non-specialists. All these evidences designate
that the quality to sight material misstatement in financial
statement is concerned with Auditors’ industry specialization
(Husam, Rana, & Abdulhadi, 2013)Conceptual Framework
While communicating the major improvements in bank auditing
in Australia with in a specific time frame, study demonstrates it
as a ‘signals of movement’ in the direction of professional
dominance which can be identified through several domestic
based and time specific literatures. However, some of those
improvements were connected with Britain’s circumstances of
bank auditing and comparison jurisdictions (Carnegie, 2016).
The above mentioned factors in content section are liable to
impact the quality of Audit report in various financial
institutions. As per the financial report (2017) of
commonwealth bank of Australia, their financial reports that are
prepared to disclose the financial picture to the stakeholders and
readers for specific financial period are based on Australian
Auditing standards, corporate governance, Auditor
independence and materiality (Australia, CBA, 2017).
(
Internal Control
)
(
Firm Size
)
(

10. Auditor’s Independence
) (
Audit Quality
)
(
Auditor’s Qualification
)
(
Industry Specialization
)
Figure: 3.1 Conceptual framework
(Extracted from (Husam, Rana, & Abdulhadi, 2013), page: 6)
Audit reports are prepared with implementation of necessary
internal control to assure the prepared financial report are
providing true and fair view and are liberated from material
misstatement either because of error or fraud or not. Similarly,
Auditing body, KPMG is independent from ANZ Banking
(Reporting body) in accordance with the corporations Act 2001
to maintain Quality Audit report (Australia, ANZ, 2017).
Similarly, As per the independent Auditor’s report to the
member of National Australia bank limited provided by Ernst &
Young, they are independent of the group in conformance with
the Auditor independence requirement of the Corporations Act
2001. Similarly EY has fulfilled their ethical responsibilities as
required by code (Annual Financial report, 2017). Also,
PricewaterhouseCoopers has performed the audit activity for
financial statements within the Westpac 2017 full year financial
report and has released a novel audit opinion. In addition to
this, regulators such as ASIC, APRA, ACCC, and AUSTRAC
are regularly executing reviews regarding investigation for
potential misconduct in financial service sector (Full year
financial report, 2017).
Hypothesis Testing:Based on the stated problem and raised

11. factors following hypothesis can be proposed to test their
validity to be concerned with audit quality:
Hypothesis 1:
H0: Null Hypothesis: Auditor Qualification does not affect the
Quality of Audit reports.
H1: Alternative Hypothesis: Auditor Qualification affects the
Quality of Audit reports.
Hypothesis 2:
H0: Null Hypothesis: Internal control does not affect the
Quality of Audit reports.
H1: Alternative Hypothesis: Internal control affects the Quality
of Audit reports.
Hypothesis 3:
H0: Null Hypothesis: Auditor Independence does not affect the
Quality of Audit reports.
H1: Alternative Hypothesis: Auditor Independence affects the
Quality of Audit reports.
Hypothesis 4:
H0: Null Hypothesis: Industry Specialization does not affect the
Quality of Audit reports.
H1: Alternative Hypothesis: Industry Specialization affects the
Quality of Audit reports.
Hypothesis 5:
H0: Null Hypothesis: Audit Firm Size does not affect Quality of
Audit reports.
H1: Alternative Hypothesis: Audit Firm Size affects Quality of
Audit reports.Research Methodology
Under this research purpose, I have conducted only literature
review from available journal articles relating to Audit Quality
and financial report of different banks in Australia. Most of the
research articles are abstracted from Google Scholar, Science
direct, SSRN JSTOR, Emerald Journals, CQU library etc.
Financial reports are abstracted from respective bank’s official
site to clarify conceptual framework.
Qualitative data Analysis:

12. As the part of qualitative analysis of the selected topic,
literature review is chosen here. Literature review is a written
document that broadens the previous work as simple review to
identify and define the unanswered question obtaining new
research. A literature review compounds existing knowledge
referring available research issues. This theory compounding
issues becomes a basic idea for making logical argumentation
and to reach the researcher on a satisfying point as per the issue
(Machi & McEvoy, 2009).
Data Series and Survey/ Interview Questionnaire:
Basically, interview/survey is conducted for the purpose of
collecting primary source of data. However, interview with the
Audit committee members will be conducted for this report to
check how several factors are affecting Audit reports in
Australian Banks. Those sample questions are given in report
Appendix
Sampling Design and Data Analysis:
For the section of sampling design and data analysis, the audit
reports of Big-4, Australian banks are analyzed here for this
project. Analysis is made to check how several factors such as
Auditors Independence, size of the firm etc. are affecting their
audit quality. Furthermore, the interview will be taken with the
Audit committee members of those banks to ask research
question. The interview is conducted with 16 people (10males
and 6 females), having 4 members from each bank’s audit
committee. The opinion from those Audit committee members
will be collected and for further analysis and interpreting
interview result for obtaining research objectives NVIVO is
used for analysis purpose.
Name of the Bank
Male
Female
Total
Commonwealth Bank

13. 3
1
4
Westpac Bank
3
1
4
ANZ Bank
2
2
4
NAB Bank
2
2
4
Total
16
Table 4.1: Respondents in Interview
Questionnaire
Research Variables:
The research will use both independent and dependent variables.
Quality of Audit reports is dependent variable here. Similarly,
Audit firm size, Auditor Independence, Auditor qualification,
Auditor reputation and Industry Specialization are Independent
variables for this research project.
Organization of the Study
The organization of the study is as follows:
Chapter One consist statement of the problem, research
aim/objective and research Question. Statement of problem
consist concept of audit quality and how research is concerned
with Audit quality.
Chapter Two comprises justification of the project that focuses
on how this research topic is conceptualized. Furthermore, it

14. also comprises the expected research result/output section that
focuses on how presented factors are responsible to alter the
quality of output.
Chapter Three includes a major part of this research project i.e.
Conceptual Framework. This section is exemplifying here how
those factors are really responding financial reports of some
Australian banks to justify the role of presented factors
affecting quality of Audit reports.
Chapter Four section comprises the part of methodology used in
this project report. It’s also shows project progress Gantt chart
and the budget spent to complete this research task.
GANTT CHART
The following table is prepared to show the timeline illustrating
how this research project was
Conducted:
Task Name
Start Day
End Day
Duration (Days)
Project Proposal
28/02/2018
5/3/2018
7
Literature Review
4/3/2018
15/04/2018
41
Data Collection/ Interview
12/4/2018
22/4/2018
10
Sampling Design/ Data Analysis
21/04/2018
2/5/2018
11

15. Final Report Submission
1/5/2018
01/06/2018
30
Table 4.2: Project Progress chart
Project Proposal= 7days
Literature Review= 41 days
Data Collection/ Interview=10 days
Data Analysis =11 days
Final Report Submission =30 days
Figure: 4.1 Gantt chart showing Project Progress
Project Budget and Budget Justification
The required budget for the proposed research is estimated
around $2000 in order for completion. That budget was
allocated with in the time fram of ( 28th February 2018-1st

16. June 2018) as given in above Gantt chart.
The budget expenses was made for following reasons:
For the Literature review, I have travelle many times to collect
journal articles,books and preiodicals information from home to
University Library that accumulates around $800 of travelling
cost. Similarly, research of Books, journals, hard copy print for
outlining ideas an d online/internet cost is $600.
To maintain Accessibility of charts and Tables and other
expanses costs around $600.
The summary of those expenditure is:
Cost Heading
Estimated Spent Amount
Travelling cost and Literature Review
$1400
Data Collection and chart/table access
$600
Total Estimated Budget
$2000
References
(2015). Retrieved 2018, from University of Washington:
https://finance.uw.edu/fr/internal-controls
ADEYEMI, S. B., OKPALA, O., & DABOR, E. L. (2012).
Factors Affecting Audit Quality in Nigeria. International
Journal of Business and Social Science , 3.
Ahmed, M. I., & Che-Ahmad, A. (2016). Effects of Board Size,
Board Committees Characteristics and Audit Quality on Audit
Report Lags. eISSN , 10 (15), 2-6.
Al-Khaddash, H., Al Nawas, R., & Ramadan, A. (2013). Factors
affecting the quality of Auditing: The Case of Jordanian
Commercial Banks. International Journal of Business and Social
Science , 4.
Alzeban, A. (20105). Influence of audit committees on internal
audit conformance with internal audit Standards. Managerial
Auditing Journal , 30 (6/7), 2-7.
(2017). Annual Financial report. National Australia Bank

17. Limited.
Australia, ANZ. (2017). ANNUAL REPORT. Australia and New
Zealand Banking Group Limited.
Australia, CBA. (2017). Annual Report 2017. Commonwealth
Bank of Australia.
Bepari, M. K., & Mollik, A. T. (2015). Effect of audit quality
and accounting and finance backgrounds of audit committee
members on firms’ compliance with IFRS for goodwill
impairment testing. Journal of Applied Accounting Research ,
16 (2), 2-8.
Carnegie, G. D. (2016). The accounting professional project and
bank failures: The case of the early 1890 Australian Banking
crisis. Journal of Management History , 22 (4), 4-8.
Carson, E., Fargher, N., & Zhang, Y. (2014). Trends in Auditor
Reporting in Australia: A Synthesis and Opportunities for
Research. Australian Accounting Review , 4 (2), 3-9.
Carson, E., Fargher, N., & Zhang, Y. (2015). Trends in Auditor
Reporting in Australia: A Synthesis and Opportunities for
Research. Australian Accountoing Review , 4 (2), 3-6.
Carson, E., Fargher, N., & Zhang, Y. (2016). Trends in Auditor
Reporting in Australia: A Synthesis and Opportunities for
Research. Australian Accounting Review , 26, 2-5.
Dunakhir, S. (2016). FACTORS ASSOCIATED WITH AUDIT
QUALITY: EVIDENCE FROM AN EMERGING MARKET.
Second Asia Pacific Conference on Advanced Research , 1.
Francis, J. R. (2010). What do we know about audit quality?
The British Accounting review , 1-3.
(2017). Full year financial report. Sydney: Westpac Group.
Godwin, A. J., & Schmulow, A. D. (2015). The Financial Sector
Regulation Bill in South Africa: Lessons from Australia. CIFR-
Research Working Paper Series , 52 (18), 3.
Habib, A., & Azim, I. (2008). Corporate governance and the
value-relevance of accounting information: Evidence from
Australia. Accounting Research Journal , 21, 1-5.
Husam, A.-K., Al Nawas, R., & Ramadan, A. (2013). Factors
affecting the quality of Auditing: The Case of Jordanian

18. Commercial Banks. International Journal of Business and Social
Science , 4, 2-5.
Husam, A.-K., Rana, A. N., & Abdulhadi, R. (2013). Factors
affecting the quality of Auditing: The Case of Jordanian
Commercial Banks. International Journal of Business and Social
Science , 4, 2-6.
Machi, L. A., & McEvoy, B. T. (2009). The Literature Review.
4, 2-5.
Mei, F., Chan, L., & McVay, S. (2009).
Internalcontrolandmanagementguidance.
JournalofAccountingandEconomics , 5 (3), 2-5.
Prawitt, D. F., Smith, J. L., & Wood, D. A. (2008). Audit effort
and earnings management. ScienceDirect: Journal of Accounting
and Economics , 45 (7), 2.
Reza, N., & Quraishi, M. K. (2015). QUALITY OF BANK
AUDIT IN BANGLADESH AND RELATIONSHIP BETWEEN
AUDIT QUALITY AND SHARE PRICE. ELK ASIA PACIFIC
JOURNAL OF FINANCE AND RISK MANAGEMENT , 6 (2),
2-3.
Shahzada, K., Pouwa, T., Rubbaniy, G., & El-Temtamy, D. O.
(2017). Audit quality during the global financial crisis: The
investors’. ELSEVIER:Research in International Business and
Finance , 1, 1-3.
Appendix
Appendix 1:
Research Questions
Please provide your opinion to the following questions:
1) How internal control of firm affects the Quality of Audit
reports?
…………………………………………………………………………
…………………………………………………………………………

19. …………………………………………………………………………
………………………………………………………………
2) Does size of Audit firm affects Audit Quality?
…………………………………………………………………………
…………………………………………………………………………
…………………………………………………………………………
………………………………………………………………
3) Does Auditor Qualification affect Quality of Audit reports?
…………………………………………………………………………
…………………………………………………………………………
…………………………………………………………………………
………………………………………………………………
4) Does Auditor independence affect Audit Quality?
…………………………………………………………………………
…………………………………………………………………………
…………………………………………………………………………
………………………………………………………………
5) Does Auditor reputation affect Audit Quality?
…………………………………………………………………………
…………………………………………………………………………
…………………………………………………………………………
………………………………………………………………
6) Does Industry Specialization of Auditor affect Audit
Quality?
…………………………………………………………………………
…………………………………………………………………………
…………………………………………………………………………
………………………………………………………………
Appendix 2:
Table showing Link for Secondary Data:
This table shows link of the annual reports of 4 banks. Annual

20. reports in the research are used to demonstrate factors
mentioned for Audit process.
Name of the Bank
Link of Annual report (For Secondary Data)
Commonwealth Bank of Australia
https://www.commbank.com.au/about-us/investors/annual-
reports.html
Westpac Bank
https://www.westpac.com.au/about-westpac/investor-
centre/financial-information/annual-reports/
ANZ Bank
http://shareholder.anz.com/annual-report-annual-review
NAB Bank
https://www.nab.com.au/about-us/shareholder-centre/financial-
disclosuresandreporting/annual-reports-and-presentations
2