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СпутникиРНSpaceXРоскосмосNASAAudit quality has traditionally been examined through quantitative indicators such as earnings management, financial reporting quality, and firm value. However, limited research has explored how key governance actors interpret audit quality and how it contributes to company value during periods of profitability volatility. This study investigates how audit quality is perceived and operationalized by auditors, financial experts, and corporate executives, drawing on Social Capital Theory and Habermas’ theory of communicative action. An interpretive qualitative design was adopted. Semi-structured interviews were conducted with six purposively selected participants comprising external auditors, senior financial experts, and chief financial officers from publicly listed companies in Indonesia. Interview data were analyzed using reflexive thematic analysis supported by NVivo 14, generating 47 initial codes, 12 analytical categories, and three overarching themes. The findings demonstrate that audit quality extends beyond technical assurance and functions as a multidimensional governance capability. First, audit quality operates as a protective governance mechanism by improving financial reporting reliability, facilitating early risk identification, and supporting evidence-based managerial decision-making. Second, it serves as symbolic and relational capital, strengthening stakeholder trust, governance legitimacy, and company value through greater transparency and credibility. Third, participants emphasized the need for adaptive and communicative audit practices, highlighting continuous auditor management communication, strategic advisory roles, and technology-enabled auditing as essential for maintaining organizational resilience during profitability volatility. This study contributes to the audit quality literature by providing qualitative evidence that complements predominantly quantitative research. The findings extend existing theory by integrating Social Capital Theory and Communicative Action Theory, demonstrating that audit quality creates organizational value not only through technical compliance but also through trust, legitimacy, and transparent communication. Practically, the study suggests that organizations should strengthen adaptive auditing, collaborative governance, and technology-supported assurance to enhance stakeholder confidence and sustain company value during financial uncertainty.
Audit quality plays a fundamental role in enhancing the credibility of financial reporting and ensuring that reported profitability accurately reflects an entity’s underlying economic performance. High-quality audits reduce information asymmetry between managers and shareholders, strengthen investor confidence, and improve market efficiency by increasing the reliability of financial statements (DeAngelo, 1981; Francis, 2004). Consequently, companies audited under rigorous auditing standards generally exhibit lower levels of earnings management, fewer financial statement restatements, and more reliable profitability information, thereby contributing to more accurate market valuation (European Audit Inspection Group, 2016). Recent evidence further demonstrates that audit quality is closely associated with stronger corporate governance mechanisms, reduced opportunistic financial reporting, and improved financial performance across different institutional settings (Bawuah, 2024; Neiroukh & Çağlar, 2025; Vu et al., 2026).
The importance of audit quality has become increasingly evident as organizations operate in environments characterized by greater business complexity, economic uncertainty, and heightened stakeholder expectations. Economic shocks, governance challenges, and increasing regulatory scrutiny require auditors to provide assurance that extends beyond compliance toward enhancing organizational transparency and accountability (Persakis & Tsakalos, 2024). Likewise, firm complexity, auditor workload, and the effectiveness of risk-based audit approaches have been shown to influence audit outcomes and the reliability of financial reporting (Saleh et al., 2025; Vu et al., 2026). Studies also indicate that auditors’ ethical orientation and social responsibility contribute positively to audit quality by strengthening professional judgment and public trust (Pittman et al., 2024).
Previous research has extensively examined the relationship between audit quality, earnings management, and financial reporting quality. High-quality auditing has consistently been found to constrain earnings management and improve the credibility of reported accounting information (DeAngelo, 1981; Francis, 2004; Abu Afifa et al., 2023; Bawuah, 2024). Additional evidence suggests that audit quality interacts with governance mechanisms, audit committee effectiveness, anti-corruption disclosure, and audit reporting practices to shape financial reporting outcomes (Duong & Nguyen, 2026; Abdullatif et al., 2025; Monjed et al., 2025). Cross-country comparisons also reveal that differences in audit regulatory regimes substantially influence audit effectiveness and market confidence (Kleinman et al., 2014). Collectively, these studies highlight audit quality as a multidimensional construct that extends beyond technical compliance to encompass governance, ethical responsibility, and institutional contexts.
Despite these important contributions, several limitations remain in the existing literature. First, most prior studies employ quantitative methods to estimate statistical relationships among audit quality, earnings management, profitability, and firm value (Abu Afifa et al., 2023; Neiroukh & Çağlar, 2025). Although these studies provide robust empirical evidence, they offer limited understanding of how key stakeholders interpret audit quality in practice or how audit processes influence strategic decision-making during periods of profitability uncertainty. Second, relatively little attention has been given to understanding the mechanisms through which audit quality shapes company value from the perspectives of auditors, financial experts, and corporate executives. Third, existing evidence has largely focused on measurable financial outcomes, while the relational, communicative, and contextual dimensions that influence stakeholders’ confidence during periods of fluctuating profitability remain insufficiently explored (DeFond & Zhang, 2014; Knechel, 2016). Addressing these gaps is increasingly important as organizations face greater economic uncertainty and are expected to maintain transparent governance while adapting strategically to rapidly changing business environments (Persakis & Tsakalos, 2024; Rini et al., 2026).
Accordingly, this study adopts a qualitative approach to explore how audit quality contributes to company value under conditions of profitability challenges. Rather than quantifying causal relationships, this research seeks to understand the experiences, interpretations, and perceptions of auditors, financial experts, and company executives regarding the role of audit quality in influencing organizational credibility, stakeholder confidence, and market valuation. By focusing on participants’ lived experiences, this study complements existing quantitative evidence and provides richer explanations of how audit quality is interpreted and implemented within organizational practice (Power, 1997; DeFond & Zhang, 2014). Furthermore, the study investigates how audit quality influences managerial decision-making during periods of profitability fluctuation, responding to recommendations for greater attention to practical and contextual dimensions of auditing research (Knechel, 2016).
This study is informed by Social Capital Theory and Communication Theory. Social Capital Theory (Bourdieu, 1986) emphasizes that organizational relationships, trust, and professional networks constitute valuable resources that facilitate cooperation and strengthen institutional legitimacy. Within auditing, audit quality represents an important form of social capital because credible audits reinforce stakeholder trust, reduce uncertainty, and enhance investor confidence, particularly during periods of financial instability. Complementing this perspective, Communication Theory, particularly Habermas's (1984) concept of communicative action, highlights the importance of transparent, credible, and mutually understandable communication in reducing information asymmetry between organizations and stakeholders. High-quality auditing therefore functions not only as a technical assurance mechanism but also as an effective communication process that supports informed decision-making and organizational legitimacy. Integrating these theoretical perspectives enables a broader understanding of audit quality as both a relational and communicative resource that contributes to sustaining company value amid profitability challenges.
Based on these objectives, this study addresses three research questions. First, how do auditors, financial experts, and company executives perceive the role of audit quality in influencing company value during periods of profitability challenges? Second, what mechanisms and organizational processes explain the relationship between audit quality and company value under conditions of fluctuating profitability? Third, what strategies can strengthen audit quality practices to better preserve company value and stakeholder confidence during periods of profitability uncertainty? Answering these questions is expected to provide practical insights for auditors, corporate managers, regulators, and investors while contributing qualitative evidence that complements the predominantly quantitative literature on audit quality and company value.
Audit quality has traditionally been defined as the probability that an auditor will detect and report material misstatements in financial statements (DeAngelo, 1981). This foundational definition emphasizes auditor competence and independence as the primary determinants of audit effectiveness. Subsequent scholarship expanded this perspective by conceptualizing audit quality as a multidimensional construct comprising audit inputs, audit processes, audit outputs, and institutional environments that collectively determine reporting reliability (Francis, 2004; Knechel et al., 2013). Contemporary governance research increasingly positions audit quality as a strategic governance mechanism rather than merely a technical compliance function. Audit quality contributes to organizational accountability, strengthens board oversight, improves transparency, and supports efficient capital markets (Carcello et al., 2020). International regulatory frameworks similarly emphasize that high-quality auditing enhances the integrity, resilience, and credibility of financial reporting systems by strengthening public confidence in corporate disclosures (IAASB, 2022; PCAOB, 2023).
Recent empirical studies further demonstrate that audit quality is influenced by a wide range of organizational and institutional factors. Corporate governance structures—including audit committee effectiveness, ownership characteristics, and female representation on audit committees—have been shown to strengthen audit effectiveness while constraining opportunistic financial reporting (Amara et al., 2025; Ghazi H Sulimany, 2024; Bawuah, 2024). Cultural values and institutional environments also shape firms’ preferences for engaging high-quality auditors (Hu et al., 2025), whereas labor market characteristics and auditor expertise affect audit performance and reporting quality (Lee et al., 2022). In addition, risk-based auditing, ethical responsibility, and auditors’ professional judgment increasingly determine audit quality within complex governance environments (Vu et al., 2026; Pittman et al., 2024).
These developments indicate that audit quality should be viewed as an institutional capability embedded within broader governance systems. Rather than representing a static compliance attribute, audit quality functions as a governance resource that supports transparency, reduces information asymmetry, and strengthens stakeholder confidence, particularly under conditions of uncertainty and financial volatility.
Profitability represents a firm’s ability to generate sustainable returns from its economic resources and remains one of the primary determinants of firm valuation (Ross et al., 2013). Stable profitability generally strengthens investors’ expectations regarding future cash flows, whereas fluctuations in profitability increase uncertainty, elevate perceived investment risk, and may negatively affect market valuation (Penman, 2013). Periods of profitability volatility intensify stakeholders’ demand for credible financial information. Under such circumstances, high-quality audits reduce information asymmetry by providing independent assurance regarding the reliability of reported financial performance (DeFond & Zhang, 2014). Prior research has demonstrated that audit quality constrains earnings management, improves accounting information quality, and enhances the credibility of corporate disclosures (Abu Afifa et al., 2023; Daryaei et al., 2024; Neiroukh & Çağlar, 2025). Studies also indicate that effective internal control systems, ownership structures, and corporate governance mechanisms jointly influence earnings management practices and organizational performance (Gooda et al., 2025; Al-Matari, 2025; Itan et al., 2024).
Moreover, digital transformation has altered the quality of accounting information by improving transparency while simultaneously increasing the complexity of financial reporting, particularly under conditions of environmental uncertainty (Li et al., 2025). Consequently, profitability volatility should be understood not only as a financial phenomenon but also as a governance challenge requiring credible assurance mechanisms capable of maintaining investor confidence.
Despite extensive quantitative evidence, relatively limited research has explored how stakeholders socially interpret audit credibility during periods of declining profitability. Understanding these perceptions remains important because company value depends not only on reported financial performance but also on stakeholders’ confidence in the credibility of that information.
Social Capital Theory provides a relational perspective for explaining how audit quality contributes to organizational legitimacy and company value. According to Bourdieu (1986), social capital consists of resources embedded within networks of trust, relationships, and mutual recognition that facilitate cooperation and generate legitimacy. Adler and Kwon (2002) further argue that trust-based relationships reduce transaction costs while improving organizational coordination and decision-making.
Within corporate governance, audit quality can be interpreted as a form of symbolic social capital. High-quality audits strengthen stakeholders’ confidence by signalling organizational transparency, accountability, and adherence to professional standards. Consequently, firms possessing greater audit credibility are more likely to maintain legitimacy during periods of declining profitability or heightened uncertainty.
Recent governance research supports this interpretation by demonstrating that ethical governance structures, corporate social responsibility, and stakeholder-oriented governance reinforce organizational integrity and public trust (Osei et al., 2025; Weiss, 2021). Similarly, governance mechanisms such as effective audit committees and independent monitoring strengthen confidence in financial reporting by improving audit effectiveness (Amara et al., 2025; Bawuah, 2024). From this perspective, audit quality functions not only as an assurance mechanism but also as an intangible organizational asset that preserves stakeholder trust and organizational legitimacy.
While Social Capital Theory explains why trust enhances organizational legitimacy, Habermas' (1984) theory of communicative action explains how such trust is established through transparent communication. Habermas argues that effective communication depends upon the fulfillment of three validity claims: truthfulness, legitimacy, and sincerity. Within auditing, financial reporting and audit interactions constitute communicative processes through which organizations demonstrate accountability and justify managerial decisions.
Power (1999) similarly argues that auditing extends beyond technical verification to become a socially embedded practice that produces legitimacy through accountability. Transparent communication between auditors, management, regulators, and investors therefore becomes particularly important during periods of profitability volatility, when stakeholders face heightened uncertainty regarding organizational performance.
Contemporary governance research increasingly supports this communicative perspective. Organizational transparency, governance disclosure, and timely audit reporting enhance stakeholder confidence by reducing information asymmetry and strengthening institutional legitimacy (Abdullatif et al., 2025; Ghazi H Sulimany, 2024). Likewise, governance challenges within public-sector information systems highlight the importance of effective communication among auditors, regulators, and organizational leaders in sustaining public trust (Latchu & Singh, 2022). Accordingly, communicative transparency complements procedural audit quality in supporting organizational legitimacy and preserving company value.
Integrating Social Capital Theory and Communicative Action Theory provides a comprehensive framework for understanding how audit quality contributes to company value during periods of profitability volatility. Audit quality is conceptualized as operating through three complementary dimensions.
a) First, the protective (technical) function emphasizes the traditional role of auditing in ensuring the reliability, accuracy, and credibility of financial reporting through professional competence and independence (DeAngelo, 1981; Francis, 2004).
b) Second, the relational function highlights audit quality as a source of social capital that strengthens trust, organizational legitimacy, and stakeholder confidence through effective governance relationships (Bourdieu, 1986; Adler & Kwon, 2002; Osei et al., 2025).
c) Third, the communicative function recognizes auditing as a process of transparent communication that facilitates mutual understanding among auditors, managers, investors, regulators, and other stakeholders by reducing information asymmetry and reinforcing accountability (Habermas, 1984; Power, 1999).
Collectively, these three dimensions position audit quality as a dynamic governance capability rather than a static compliance attribute. During periods of profitability volatility, audit quality simultaneously protects reporting integrity, reinforces organizational legitimacy, and facilitates transparent stakeholder communication, thereby contributing to the preservation of company value. This integrated framework provides the theoretical foundation for interpreting the perceptions and experiences of auditors, financial experts, and corporate executives explored in the present qualitative study.
This study adopted a qualitative interpretive design to explore how audit quality influences company value during periods of profitability volatility. An interpretivist approach was considered appropriate because audit quality is socially constructed through stakeholders’ experiences, interactions, and interpretations rather than solely through measurable audit indicators (Creswell & Creswell, 2018). Guided by Social Capital Theory and Habermas’ theory of communicative action, the study examined audit quality as a relational and communicative governance resource that shapes organizational legitimacy, stakeholder trust, and company value (Power, 1999). The analysis was intentionally bounded to audit quality under conditions of profitability volatility to ensure coherence between the theoretical framework, research questions, and empirical inquiry.
The study was conducted in Indonesia between March and May 2026 involving publicly listed companies operating in the manufacturing, financial services, and consumer goods sectors. These industries were selected because they are subject to mandatory external audits, intensive financial reporting, and fluctuating business conditions that influence investor confidence and company value. Participants represented both audit providers (external auditors from nationally recognized public accounting firms, including Big Four and non-Big Four affiliates) and audit users (senior financial experts and CFO-level executives from listed companies). Interviews were conducted either face-to-face or via secure online platforms.
Purposive sampling was employed to recruit participants with substantial experience in auditing, financial reporting, and corporate governance (Creswell & Creswell, 2018). Eligible participants were directly involved in audit or financial governance activities, had experience managing profitability fluctuations, held strategic or technical decision-making roles, and possessed at least eight years of professional experience. The final sample consisted of six participants: two external auditors, two senior financial experts, and two CFO-level executives. Recruitment continued until thematic saturation was achieved, whereby no substantially new concepts emerged during the final interviews. Participants were anonymized using identification codes (AUD1–AUD2, FIN1–FIN2, and EXE1–EXE2) to ensure confidentiality.
As shown in Table 1, the participants represented three complementary governance perspectives comprising external auditors, senior financial experts, and chief financial officers from publicly listed companies. Their professional experience ranged from 14 to 22 years, ensuring substantial expertise in auditing, corporate governance, financial reporting, and strategic decision-making. This diversity enhanced the richness of the empirical data and enabled cross-case comparison across key governance actors.
Ethical approval was obtained from the Ethics Committee of the University of Sultan Ageng Tirtayasa (Approval No. 1389/EC.12/V/2026) before data collection commenced. Participation was voluntary, and all participants provided written informed consent after receiving information regarding the study objectives, confidentiality procedures, and their right to withdraw at any stage. Interviews were audio-recorded with permission, transcribed verbatim, and anonymized. All research data were securely stored in password-protected files accessible only to the research team.
Data were collected through semi-structured interviews because they facilitate exploration of professional experiences, organizational practices, and communicative interactions related to audit quality (Kvale & Brinkmann, 2009). The interview protocol was developed from the research questions and covered three domains: (1) perceptions of audit quality during profitability volatility, (2) mechanisms linking audit quality, profitability, and company value, and (3) strategies for improving audit quality. Interviews lasted approximately 45–60 minutes, were conducted face-to-face or online, audio-recorded with participants’ consent, transcribed verbatim, and verified against the original recordings before analysis.
Data were analyzed using reflexive thematic analysis following Braun and Clarke's (2006) six-phase framework. Interview transcripts were managed and coded using NVivo 14 (QSR International), which facilitated systematic coding, memo writing, retrieval of coded data, and documentation of analytical decisions. The software supported data management, while coding and interpretation remained the responsibility of the researchers. Analysis progressed from familiarization with the transcripts to inductive open coding, generating 47 initial codes. These were consolidated into 12 analytical categories and subsequently synthesized into three overarching themes: (1) Audit Quality as a Protective Governance Mechanism; (2) Audit Quality as Symbolic and Relational Capital; and (3) Adaptive and Communicative Audit Practices During Profitability Volatility. Cross-case comparison across auditors, financial experts, and executives was conducted to identify convergent and divergent perspectives. The final themes were interpreted using Social Capital Theory and Habermas’ theory of communicative action to explain how audit quality contributes to governance credibility, stakeholder trust, and company value (Braun & Clarke, 2006).
Trustworthiness was established through credibility, dependability, confirmability, and transferability (Miles et al., 2014). Credibility was enhanced through triangulation across auditors, financial experts, and executives, together with member checking. Dependability was supported through an audit trail documenting coding decisions and theme development in NVivo 14. Confirmability was strengthened through peer debriefing and reflexive memo writing to minimize researcher bias. Transferability was supported by providing detailed descriptions of the research setting, participants, and analytical procedures.
This study focused specifically on the relational, communicative, and governance dimensions of audit quality during profitability volatility rather than measuring statistical relationships between audit quality and financial performance. This bounded scope ensured consistency between the interpretivist paradigm, theoretical framework, and research objectives while providing contextual insights that complement existing quantitative audit quality research.
The first theme conceptualizes audit quality as a protective governance mechanism that enhances financial reporting reliability, identifies organizational risks, and supports profitability during periods of financial uncertainty. Across all participant groups, audit quality was consistently viewed as extending beyond statutory compliance by providing assurance that financial information accurately reflects organizational performance and supports managerial decision-making.
As summarized in Table 2, participants consistently interpreted audit quality as extending beyond technical compliance. The analytical progression revealed three interconnected governance functions comprising protective, relational, and communicative dimensions, which collectively explain how audit quality contributes to company value during periods of profitability volatility.
Financial reporting reliability
Participants emphasized that the primary function of audit quality is to ensure the credibility and accuracy of financial reporting. External auditors described high-quality auditing as an essential mechanism for detecting material misstatements and strengthening the integrity of financial statements before they influence managerial or investor decisions.
Auditor 1 explained:
"Audit quality ensures that the company's financial statements accurately reflect its real financial position."
Similarly, Auditor 2 noted:
"A rigorous audit process helps detect misstatements that, if not corrected, could negatively affect profitability."
These responses indicate that participants perceived audit quality as a preventive mechanism that safeguards the reliability of financial information and minimizes the likelihood of reporting errors affecting organizational performance.
Risk identification and profitability protection
Another important category concerned the role of audit quality in identifying operational and financial risks before they develop into larger organizational problems. Participants consistently described auditing as an early warning system that supports corrective actions and protects profitability.
Financial Expert 2 stated:
"Auditors identified cost inefficiencies that, once corrected, directly improved our profitability."
Likewise, Auditor 1 emphasized:
"Identifying potential risks early in the audit process protects profitability and supports the company's long-term financial stability."
These findings demonstrate that participants regarded audit quality as an instrument for reducing financial uncertainty through timely identification of inefficiencies, internal control weaknesses, and emerging risks.
Decision support for financial performance
Participants also highlighted that audit findings provide valuable evidence for strategic financial decision-making. Rather than functioning solely as compliance reports, audit outcomes were perceived as actionable information supporting operational improvements and financial planning.
Company Executive 1 explained:
"The insights provided by the audit help us steer our financial strategy in a way that consistently enhances profitability."
Similarly, Company Executive 2 described how audit recommendations facilitated resource reallocation and operational improvements that strengthened financial performance.
Overall, this theme demonstrates that participants perceived audit quality as a governance mechanism that protects organizational value through reliable financial reporting, proactive risk identification, and evidence-based decision-making. Although auditors primarily emphasized reporting integrity and risk mitigation, financial experts and corporate executives highlighted the practical contribution of audit findings to improving profitability and organizational performance.
The second theme positions audit quality as a form of symbolic and relational capital that strengthens stakeholder confidence, organizational legitimacy, and company value. Across all participant groups, audit quality was consistently associated with transparent governance practices that enhance investor trust and reinforce organizational credibility, particularly during periods of profitability volatility.
Strengthening stakeholder confidence
Participants emphasized that high-quality audits increase stakeholders’ confidence by providing credible and transparent financial information. Rather than viewing audit reports merely as regulatory requirements, participants perceived them as signals of organizational accountability and financial integrity.
Company Executive 1 stated:
"Our investors trust us more when they see that we've undergone a rigorous audit and the results are transparent."
Similarly, Financial Expert 1 explained:
"Audit quality ensures that the company is on a solid financial footing, which ultimately boosts profitability."
These responses indicate that participants considered audit quality an important mechanism for reducing information asymmetry and strengthening confidence among investors, creditors, and other stakeholders.
Governance credibility and company value
Another recurring category concerned the contribution of audit quality to governance credibility and long-term company value. Participants consistently described audit findings as supporting organizational legitimacy by improving the credibility of financial reporting and strategic decision-making.
Auditor 1 observed:
"When audit quality is compromised, profitability suffers because financial misstatements or overlooked inefficiencies can lead to unanticipated losses, which directly impact the company's value."
Company Executive 2 similarly emphasized the external implications of audit quality:
"When investors see a company has gone through a rigorous audit, they feel more confident in its financial health. This directly impacts how the market values the company."
These findings demonstrate that participants perceived audit quality as extending beyond financial assurance to influence market perceptions and corporate reputation. Reliable auditing was viewed as reinforcing governance legitimacy while supporting sustainable company value through increased stakeholder confidence.
Organizational trust through evidence-Based decision making
Participants also highlighted that audit quality strengthens organizational trust by providing reliable evidence for strategic financial decisions. Audit findings were regarded as objective information that supports management in improving operational performance and maintaining organizational credibility during uncertain business conditions.
Company Executive 1 explained:
"The audit findings enabled us to make informed decisions that improved profitability in the short term and added to the company's value in the long term."
Likewise, Financial Expert 1 described how audit recommendations identified operational inefficiencies whose correction improved both profitability and organizational value.
Collectively, this theme illustrates that participants perceived audit quality as a strategic governance resource that generates stakeholder trust, enhances organizational legitimacy, and reinforces company value. Although auditors primarily emphasized reporting credibility, financial experts and executives highlighted the broader relational value of auditing in sustaining investor confidence and organizational reputation during periods of profitability volatility.
The third theme highlights the need for adaptive and communicative audit practices capable of responding to profitability volatility. Participants consistently emphasized that conventional compliance-oriented auditing is insufficient during periods of financial uncertainty. Instead, they advocated for audit approaches characterized by flexibility, continuous communication, strategic advisory support, and greater use of technology.
Adaptive audit approaches
Participants agreed that audit procedures should be responsive to an organization’s financial circumstances rather than relying exclusively on standardized audit programs. During periods of profitability decline, greater emphasis should be placed on identifying critical financial risks and supporting timely managerial responses.
Auditor 1 explained:
"Audits should prioritize the most pressing financial risks when companies are in trouble, rather than sticking rigidly to traditional methods."
Similarly, Company Executive 1 stated:
"Auditors need to understand the unique challenges we face during financial difficulties and adjust their approach accordingly."
Financial Expert 2 further illustrated this perspective by describing how a customized audit approach enabled the organization to implement corrective actions that reduced financial losses. These findings suggest that participants viewed adaptive auditing as essential for maintaining organizational resilience under changing financial conditions.
Communicative and collaborative audit practices
Another prominent category concerned the importance of effective communication throughout the audit process. Participants emphasized that timely communication between auditors and management improves the usefulness of audit findings and supports more responsive organizational decision-making.
Financial Expert 1 noted:
"During difficult periods, we need more frequent and clear communication from auditors, so we can make adjustments before things worsen."
Company Executive 2 similarly explained:
"When auditors and our team worked more closely together, we could implement changes faster, which was essential for our survival during the downturn."
These responses indicate that participants regarded communication as an integral component of audit quality, enabling audit findings to be translated into timely organizational actions rather than remaining solely compliance documents.
Strategic advisory and technology-enabled auditing
Participants also described an evolving expectation that auditors should contribute strategic insights beyond traditional assurance activities. Rather than functioning exclusively as compliance evaluators, auditors were expected to provide recommendations that strengthen organizational resilience and long-term financial sustainability.
Company Executive 1 stated:
"We need auditors to act as advisors, helping us navigate through financial difficulties with practical guidance, not just pointing out what's wrong."
Auditor 1 similarly observed:
"Auditors should offer more than just a compliance check—we need to help companies with solutions that improve financial resilience."
Participants additionally highlighted the growing importance of technology in supporting adaptive auditing. Auditor 2 recommended integrating predictive analytical tools into audit processes to identify emerging financial risks before they materialize, while Financial Expert 2 emphasized that advanced analytical technologies would enable auditors to deliver more timely and relevant recommendations during periods of economic uncertainty.
This theme demonstrates that participants perceived future audit practices as increasingly adaptive, collaborative, and technology-enabled. Across all stakeholder groups, audit quality was viewed not only as an assurance function but also as a strategic governance capability that supports organizational resilience through proactive communication, evidence-based recommendations, and continuous engagement during periods of profitability volatility.
This study explored how audit quality contributes to company value during periods of profitability volatility from the perspectives of external auditors, financial experts, and corporate executives. The findings demonstrate that audit quality extends beyond its traditional assurance function and operates as a multidimensional governance resource encompassing protective, relational, and communicative roles. Participants consistently perceived high-quality auditing as enhancing reporting reliability, strengthening governance credibility, and supporting strategic decision-making during financial uncertainty. These findings reinforce the view that audit quality should not be understood solely through technical indicators but also through its capacity to generate organizational trust and reduce information asymmetry (DeAngelo, 1981; Francis, 2004; DeFond & Zhang, 2014). They further support recent evidence showing that high-quality auditing constrains earnings management and improves organizational performance by strengthening governance effectiveness (Abu Afifa et al., 2023; Bawuah, 2024; Neiroukh & Çağlar, 2025).
The first theme, Audit Quality as a Protective Governance Mechanism, highlights the preventive role of auditing in maintaining financial reporting integrity and protecting organizational performance. Participants emphasized that rigorous audits facilitate early identification of financial risks, operational inefficiencies, and reporting inaccuracies before they affect profitability and company value. This finding aligns with prior studies demonstrating that audit quality improves reporting reliability, strengthens internal control, and reduces earnings management (DeAngelo, 1981; Francis, 2004; Daryaei et al., 2024; Gooda et al., 2025). Unlike previous quantitative studies that primarily estimate statistical associations between audit quality and financial outcomes, the present study provides qualitative evidence explaining how practitioners perceive audit quality as an organizational safeguard that supports managerial decision-making during periods of profitability volatility.
The second and third themes further extend current audit quality literature by emphasizing the relational and communicative dimensions of auditing. Participants consistently associated audit quality with investor confidence, governance legitimacy, and organizational trust, reflecting the principles of Social Capital Theory (Bourdieu, 1986; Adler & Kwon, 2002). High-quality audits were perceived as symbolic resources that reinforce corporate credibility and sustain company value under financial uncertainty. Furthermore, participants advocated more adaptive audit practices characterized by continuous communication, strategic advisory roles, and greater utilization of predictive analytical technologies. These findings support Habermas' (1984) theory of communicative action by illustrating that transparent dialogue between auditors and management enhances the practical value of audit findings. They also complement emerging evidence suggesting that governance effectiveness increasingly depends on communication quality, auditor responsiveness, and technology-enabled assurance rather than compliance alone (Pittman et al., 2024; Abdullatif et al., 2025; Vu et al., 2026).
This study makes several important contributions. Theoretically, it extends audit quality research by integrating Social Capital Theory and Communicative Action Theory into a qualitative framework that conceptualizes audit quality as a governance capability operating through protective, relational, and communicative mechanisms. Methodologically, the study contributes qualitative evidence that complements the predominantly quantitative literature by explaining how audit quality is experienced and interpreted by key governance actors. Practically, the findings suggest that organizations should strengthen audit quality not only through technical compliance but also by promoting transparent communication, collaborative auditor–management relationships, adaptive audit approaches, and strategic use of audit recommendations. Such practices may enhance governance credibility, maintain stakeholder confidence, and preserve company value during periods of profitability volatility.
This study examined how audit quality influences company value during periods of profitability volatility from the perspectives of external auditors, financial experts, and corporate executives. Using an interpretive qualitative approach, the findings demonstrate that audit quality functions beyond its conventional assurance role by serving as a protective governance mechanism, a source of symbolic and relational capital, and a communicative resource that supports organizational resilience. High-quality auditing enhances the credibility of financial reporting, facilitates early identification of financial risks, strengthens stakeholder confidence, and provides strategic insights that support managerial decision-making under conditions of financial uncertainty.
The study also extends the understanding of audit quality by integrating Social Capital Theory and Habermas’ theory of communicative action, illustrating that the value of auditing lies not only in technical compliance but also in its ability to strengthen organizational legitimacy through trust, transparency, and effective communication. These findings contribute to the growing audit quality literature by providing qualitative evidence that complements predominantly quantitative studies and offers a richer understanding of how audit quality is interpreted and applied within organizational practice.
From a practical perspective, the findings suggest that organizations should strengthen audit quality through adaptive audit approaches, collaborative auditor–management relationships, transparent communication, and greater use of technology-supported auditing. Such practices may improve governance effectiveness, reinforce investor confidence, and help preserve company value during periods of profitability volatility.
Zenodo: [Underlying Data - Audit Quality in Action: How It Shapes Company Value Amid Profitability Challenges]. https://doi.org/10.5281/zenodo.21235947 (Pangaribuan, 2026a). All data are provided under Creative Commons Attribution 4.0 International license. This project contains the following data: