A Tale of Three Perspectives: How GNFs, Annual NAFs, and Triennial NAFs Experience the PCAOB Inspection Deficiency Remediation Process

44 Pages Posted: 14 Nov 2023 Last revised: 30 Aug 2024

See all articles by Kenneth L. Bills

Kenneth L. Bills

Michigan State University - Department of Accounting & Information Systems

John Keyser

Case Western Reserve University

Marietta Peytcheva

Lehigh University

Ally Zimmerman

Florida State University - Department of Accounting

Date Written: July 22, 2024

Abstract

Using qualitative methods, we interview practitioners with PCAOB inspection remediation experience to investigate the challenges global network firms (GNFs), annual non-affiliated firms (NAFs), and triennial NAFs experience with the remediation process and how they respond to them. We find stark differences in the remediation challenges experienced by these groups of firms, including differences in their PCAOB remediation teams’ accessibility, consistency, and timing of communication. For example, NAF respondents perceive a lack of guidance and timely feedback from the PCAOB and difficulties transitioning from triennial to annual inspection, and some even perceive they are being pushed out of the public issuer market. Using Oliver’s (1991) strategic responses framework to analyze how firms respond to the challenges of remediation, we find that GNF and NAF firms tend to respond differently to remediation challenges, and their differential responses are related to differential perceptions of the PCAOB’s actions and intentions. Overall, GNFs appear to mostly use acquiescence, compromise, and proactive influence strategies, whereas NAFs also tend to use avoidance and defiance strategies. Our study provides academics and regulators detailed insights from auditors’ perspectives on the impact of the PCAOB’s actions during the remediation process.

Keywords: remediation, inspection deficiencies, quality control criticisms, global network firms, non-affiliated firms, strategic responses, small audit firms, Non-Big 4, Big 4

JEL Classification: M40, M42, M48

Suggested Citation

Bills, Kenneth L. and Keyser, John and Peytcheva, Marietta and Zimmerman, Aleksandra, A Tale of Three Perspectives: How GNFs, Annual NAFs, and Triennial NAFs Experience the PCAOB Inspection Deficiency Remediation Process (July 22, 2024). Available at SSRN: https://ssrn.com/abstract=4613037

Kenneth L. Bills

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States

John Keyser

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

Marietta Peytcheva

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States
610 758 2818 (Phone)
610 758 5992 (Fax)

Aleksandra Zimmerman (Contact Author)

Florida State University - Department of Accounting ( email )

Rovetta Business Bldg. (RBA)
College of Business
Tallahassee, FL 32306-1110
United States

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