IDENTIFICATION OF RISKS TO THE QUALITY OF THE FINANCIAL STATEMENT AUDIT BASED ON THE RESULTS OF EXTERNAL CONTROL: A SUBJECT-ORIENTED APPROACH

Abstract

The article examines approaches to identifying audit quality risks in the financial statement audit based on the results of external quality control of audit activities. The purpose of the study is to systematize audit quality risks using a subject-oriented approach. The research is based on the analysis of empirical data obtained from external inspections of audit firms for the period 2020–2024. The results indicate that the majority of identified deficiencies are systemic and consistently recurring, which allows them to be interpreted not merely as isolated errors but as manifestations of audit quality risks. The study develops an approach to the identification of audit quality risks through the interaction of three levels of the audit system: the engagement level as the environment of risk manifestation, the audit firm level as the source of risk formation, and the external regulatory environment as the framework for risk regulation. Such an approach enables the establishment of cause-and-effect relationships between identified deficiencies and the factors that determine their occurrence. The scientific novelty of the study lies in the interpretation of external inspection results as an empirical basis for identifying audit quality risks rather than solely as a tool for assessing compliance with professional standards. This allows for a transition from a formal assessment of deficiencies to a systematic understanding of their underlying causes. The practical significance of the obtained results lies in the possibility of using external quality control data as a tool for identifying and managing audit quality risks, which contributes to improving quality management systems within audit firms, strengthening internal control processes, and enhancing the overall effectiveness of audit practice. The proposed approach also supports the early identification and prevention of systemic deficiencies in audit activities.