THE IMPACT OF AUDIT QUALITY ON THE FINANCIAL STABILITY OF PRIVATE EQUITY FUNDS

Abstract

The article systematizes the literature on audit quality and external monitoring mechanisms in PE, identifies the channels through which audit influences a fund's financial stability (reducing information risk, disciplining assessments, increasing the credibility of reporting, reducing the cost of financing, and reducing the likelihood of conflicts with investors), and proposes a conceptual model and a set of testable hypotheses for empirical research. Particular attention is paid to the role of auditor selection (Big 4 vs. non-Big 4), industry expertise, independence and audit procedures in the fair value environment and limited transparency of private markets.