Regulatory Oversight and Auditor Market Share

70 Pages Posted: 23 Mar 2017 Last revised: 3 May 2017

Date Written: May 1, 2017

Abstract

We examine whether auditor regulatory oversight affects the value of financial statement audits. Using the PCAOB international inspection program as a setting to generate within country variation in regulatory oversight, we find that non-U.S. auditors inspected by the PCAOB gain 4 to 6% market share from competing auditors after PCAOB inspection reports are made public. When inspection findings reveal that an auditor has many engagement-level deficiencies, market share gains following inspection reports are significantly smaller. Our evidence suggests that regulatory scrutiny increases the assurance value of an audit and highlights the role of public regulatory oversight in the audit market.

Keywords: Auditing; regulation; PCAOB; market share; assurance; financial accounting; agency costs

JEL Classification: M4; M41; M42; M48; G18; G38; K22

Suggested Citation

Aobdia, Daniel and Shroff, Nemit, Regulatory Oversight and Auditor Market Share (May 1, 2017). Journal of Accounting & Economics (JAE), Vol. 63, No. 2, 2017, pp. 262-287.. Available at SSRN: https://ssrn.com/abstract=2939097

Daniel Aobdia

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

Nemit Shroff (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main St.
E62-679
Cambridge, MA MA 02142
United States
6173240805 (Phone)

HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=51407&co_list=F

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