PCAOB Form 2 Disclosure: A Firm-Level Signal of Audit Quality?

65 Pages Posted: 25 Sep 2014 Last revised: 25 Jan 2016

Steve Buchheit

University of Alabama

William L. Buslepp

Louisiana State University, Baton Rouge - Department of Accounting

Date Written: January 25, 2016


In response to Section 102(d) of the Sarbanes-Oxley Act, PCAOB Rule 2200 required annual reporting from all registered accounting firms via PCAOB Form 2. Filed for the first time during the second quarter of 2010, PCAOB Form 2 provides information about (1) each accounting firm’s available human resources and (2) where firms deploy their human resources (e.g., public auditing engagements vs. other firm-provided services). We use Form 2 information to construct firm-specific audit workload measures and measures of non-audit work. We provide evidence that Form 2 information captures audit inputs incrementally better than common fee-based proxies. Specifically, our Form 2-based workload measure is associated with common audit quality proxies (restatements, discretionary accruals, and going concern opinions) during the available testing period (2009-2015); however, fee-based audit input proxies show minimal association with audit quality measures during the same time period. Given that various stakeholders desire publicly available audit quality indicators (e.g., Bedard, Johnstone, and Smith 2010; Martin 2013), our results suggest that PCAOB Form 2 has partially fulfilled the intended purpose of providing valuable information to the public (PCAOB 2008).

Keywords: Audit quality, Auditor workload, Public Company Accounting Oversight Board

JEL Classification: M42

Suggested Citation

Buchheit, Steve and Buslepp, William L., PCAOB Form 2 Disclosure: A Firm-Level Signal of Audit Quality? (January 25, 2016). Available at SSRN: https://ssrn.com/abstract=2500632 or http://dx.doi.org/10.2139/ssrn.2500632

Steve Buchheit

University of Alabama ( email )

101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487
United States

William L. Buslepp (Contact Author)

Louisiana State University, Baton Rouge - Department of Accounting ( email )

E.J. Ourso College of Business Administration
2800 Business Education Complex
Baton Rouge, LA 70803
United States

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