A Review and Evaluation of Audit Quality Oversight

Indian Accounting Review, Forthcoming

Marshall School of Business Working Paper No. ACC 03.14

23 Pages Posted: 24 Jul 2014

See all articles by Srinivasan Ragothaman

Srinivasan Ragothaman

University of South Dakota

Theodore J. Mock

University of Southern California; University of California, Riverside

Rajendra P. Srivastava

University of Kansas - Accounting and Information Systems Area

Abstract

As a result of massive financial statement frauds at Enron, WorldCom, Tyco, Sunbeam, Waste Management, Xerox and others, the US Congress enacted the Sarbanes Oxley Act of 2002 (SOX 2002). This Act set up the Public Company Accounting Oversight Board (PCAOB) which regulates the auditing profession in the US. The PCAOB issues auditing standards, inspects audit quality and also has enforcement powers. Following the US lead, nations such as Australia, Canada, and the United Kingdom have set up national statutory bodies to monitor audit quality. This paper summarizes the work of these national bodies and synthesizes recent reports of these organizations concerning audit quality. Important lessons gleaned from this synthesis can be useful for those charged with audit regulation in India and elsewhere. For example, auditor regulation in India is in its nascent stage. In August 2013, the Companies Act of 2013 established the National Financial Reporting Authority (NFRA). NFRA is tasked with the monitoring of audits of public company financial statements in India, among other mandates. This paper discusses the draft rules for auditor oversight developed by NFRA and provides some suggestions as to how countries beginning to develop audit quality inspection procedures can benefit from the prior experiences of others.

Keywords: Auditor oversight, PCAOB inspections, Audit Quality monitoring

JEL Classification: M41

Suggested Citation

Ragothaman, Srinivasan and Mock, Theodore J. and Srivastava, Rajendra Prasad, A Review and Evaluation of Audit Quality Oversight. Indian Accounting Review, Forthcoming; Marshall School of Business Working Paper No. ACC 03.14. Available at SSRN: https://ssrn.com/abstract=2469941

Srinivasan Ragothaman (Contact Author)

University of South Dakota ( email )

414 East Clark Street
Vermillion, SD 57069
United States

Theodore J. Mock

University of Southern California ( email )

Los Angeles, CA 90089-0441
United States

University of California, Riverside ( email )

Riverside, CA 92521
United States

Rajendra Prasad Srivastava

University of Kansas - Accounting and Information Systems Area ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

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