U.S. Auditors' Perceptions of the PCAOB Inspection Process: A Behavioral Examination

67 Pages Posted: 21 Apr 2015 Last revised: 14 May 2019

See all articles by Lindsay Johnson

Lindsay Johnson

Independent

Marsha B. Keune

University of Dayton

Jennifer Winchel

University of Virginia - McIntire School of Commerce

Date Written: July 18, 2018

Abstract

This study examines U.S. auditors’ observations of the PCAOB inspection process, and its impact on their work, in order to understand the current U.S. regulatory audit climate. Using 20 interviews with experienced auditors, we consider behavioral factors (e.g., perceived power of and trust in the PCAOB) that can impact the level and form of auditor compliance according to theory from the slippery slope framework on audit regulation (Kirchler et al. 2008; Dowling et al. 2018). Our participants described an audit climate with a powerful regulator. They reported that their desire to receive “clean” inspection reports has had a substantial impact on audit procedures and quality control. However, our participants do not appear to have high trust in the PCAOB, as they questioned aspects of the inspection process and its expectations. Accordingly, we conclude that U.S. public company auditors operate in an antagonistic environment where auditors perceive the PCAOB has high coercive power. In other words, they comply due to fear of enforcement rather than agreement with the PCAOB’s views on audit quality. Some auditors also indicated that they consider both the costs and benefits of compliance. Theoretical intuition implies that any future increases to perceived costs relative to perceived benefits of compliance could ultimately decrease the PCAOB’s coercive power and reduce U.S. auditor compliance. Our findings have implications for regulators and researchers interested in understanding behavioral factors that may influence regulatory compliance.

Keywords: audit regulation; PCAOB inspections; audit deficiencies; compliance

JEL Classification: M41

Suggested Citation

Johnson, Lindsay and Keune, Marsha B. and Winchel, Jennifer, U.S. Auditors' Perceptions of the PCAOB Inspection Process: A Behavioral Examination (July 18, 2018). Available at SSRN: https://ssrn.com/abstract=2597273 or http://dx.doi.org/10.2139/ssrn.2597273

Lindsay Johnson

Independent ( email )

Marsha B. Keune

University of Dayton ( email )

Dayton, OH 45469
United States

Jennifer Winchel (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

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