Insights into Auditor Public Oversight Boards: Whether, How, and Why they 'Work'

52 Pages Posted: 26 Feb 2020

See all articles by Michelle Hanlon

Michelle Hanlon

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

Nemit Shroff

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

Date Written: January 28, 2020

Abstract

We survey 170 inspectors, representing 27% of the inspection staff, from auditor public oversight boards (POBs) in 20 countries to understand whether, how, and why auditors change auditing practices in response to POB oversight. We find that a large majority of POB inspectors believe that auditors frequently respond to inspector feedback by changing audit procedures and quality control systems, increasing documentation, audit effort, scrutiny of management estimates, conducting training, and modifying the audit-quality review process. Inspectors perceive that the primary reasons why auditors respond to their feedback are 1) POB enforcement capabilities, 2) the perceived authority of the POBs, 3) public disclosure of inspection findings, and 4) that POBs have a culture conducive for detecting auditing deficiencies. Cross-sectional tests suggest that inspection frequency and the number of inspectors employed by a POB also affect the perceived extent to which auditors respond to inspection feedback. We ask questions in additional areas to support (or not) other theories in the literature.

Keywords: Audit regulation, PCAOB, Audit quality, Enforcement, Disclosure

JEL Classification: M41, M42, K22

Suggested Citation

Hanlon, Michelle and Shroff, Nemit, Insights into Auditor Public Oversight Boards: Whether, How, and Why they 'Work' (January 28, 2020). Available at SSRN: https://ssrn.com/abstract=3527584 or http://dx.doi.org/10.2139/ssrn.3527584

Michelle Hanlon

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

100 Main Street
E62-668
Cambridge, MA 02142
United States
617-253-9849 (Phone)

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
72
Abstract Views
231
rank
340,400
PlumX Metrics