Did the PCAOB’s 2009 Office Expansion Improve Audit Quality?

51 Pages Posted: 5 Mar 2021 Last revised: 13 Sep 2022

See all articles by James Justin Blann

James Justin Blann

Arizona State University

Tyler J. Kleppe

University of Kentucky - Von Allmen School of Accountancy

Jonathan E. Shipman

University of Arkansas

Date Written: June 28, 2022

Abstract

We investigate whether the PCAOB’s decision to expand the number and location of its inspection offices in 2009 improved the reliability of U.S. audits. We use a difference-in-differences empirical design to consider the impacts of the expansion on audit quality and find that audit quality significantly improved following the PCAOB’s expansion in markets where new offices opened relative to markets without an office opening. We find that the improvement in audit quality appears to be driven by auditors’ reaction to real changes in PCAOB oversight and that triennially inspected auditors appear to be impacted the most by this office expansion. Our findings provide new insights into the PCAOB’s operational decision making and suggest that the regulator’s additional investment in audit oversight was effective in improving audit quality.

Keywords: Public Company Accounting Oversight Board (PCAOB); auditor oversight; audit quality

JEL Classification: M40; M41; M42; M48

Suggested Citation

Blann, James and Kleppe, Tyler J. and Shipman, Jonathan E., Did the PCAOB’s 2009 Office Expansion Improve Audit Quality? (June 28, 2022). Available at SSRN: https://ssrn.com/abstract=3798034 or http://dx.doi.org/10.2139/ssrn.3798034

James Blann

Arizona State University ( email )

Tempe, AZ 85287
United States

Tyler J. Kleppe (Contact Author)

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States

Jonathan E. Shipman

University of Arkansas ( email )

Business Bldg. 454
Fayetteville, AR 72701
United States

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