The Impact of PCAOB International Registration on Audit Quality and Audit Fees: Evidence from China

42 Pages Posted: 6 Feb 2018 Last revised: 21 Nov 2018

See all articles by Wuchun Chi

Wuchun Chi

National Chengchi University (NCCU) - Department of Accounting

Hamilton Elkins

University of Saskatchewan- Edwards School of Business

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Partha S. Mohapatra

California State University, Sacramento - Department of Accounting

Date Written: January 28, 2018

Abstract

Despite the importance of registration with the PCAOB, there is surprisingly little academic research on the registration process and its impact on audit outcomes (Abernathy, Barnes and Stefaniak 2013). The PCAOB allows registration of audit firms from non-US countries. However, China and a few other countries do not allow the PCAOB to conduct inspections of audit firms. We take advantage of this natural setting to investigate whether PCAOB-registered audit firms improve audit quality in the absence of inspections. We also examine whether PCAOB-registered audit firms charge an audit fee premium. We find that both audit quality and audit fees increase following PCAOB registration. Overall, our findings suggest that PCAOB registration has a positive impact on the quality of audits in China and that clients are willing to pay higher audit fees for audits by PCAOB-registered firms.

Keywords: PCAOB registration, PCAOB inspection, audit quality, audit fees

Suggested Citation

Chi, Wuchun and Elkins, Hamilton and Lobo, Gerald J. and Mohapatra, Partha S., The Impact of PCAOB International Registration on Audit Quality and Audit Fees: Evidence from China (January 28, 2018). Available at SSRN: https://ssrn.com/abstract=3111973 or http://dx.doi.org/10.2139/ssrn.3111973

Wuchun Chi

National Chengchi University (NCCU) - Department of Accounting ( email )

No. 64, Sec 2
Chih-Nan Road
Wenshan 116, Taipei
Taiwan
886-2-29393091-81031 (Phone)
886-2-29387113 (Fax)

HOME PAGE: http://www3.nccu.edu.tw/~wchi/

Hamilton Elkins

University of Saskatchewan- Edwards School of Business ( email )

PotashCorp Building
25 Campus Drive
Saskatoon, Saskatchewan S7N 5A7
Canada
306-966-5810 (Phone)

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

Partha S. Mohapatra (Contact Author)

California State University, Sacramento - Department of Accounting ( email )

United States

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