Insights into Auditor Public Oversight Boards: Whether, How, and Why they 'Work'
52 Pages Posted: 26 Feb 2020
Date Written: January 28, 2020
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: Suggested Citation