Auditors' Perceptions of the PCAOB Inspection Process

Johnson, Lindsay M.; Keune, Marsha B.; Winchel, Jennifer

doi:10.2139/ssrn.2597273

Cited by 17 publications

(47 citation statements)

References 54 publications

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“…With respect to regulation, Johnson et al (2014) report that auditors are devoting considerable effort to mitigating potential PCAOB inspection findings, including performing additional procedures, researching current PCAOB inspection focus, and preparing detailed analyses for potential PCAOB inspection questions. Overall, however, the auditors do not feel they have much control over the inspection outcome irrespective of their efforts.…”

Section: Selected Recent Researchmentioning

confidence: 99%

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The Work Environment in Large Audit Firms: Current Perceptions and Possible Improvements

Hermanson

Houston

Stefaniak

et al. 2016

Current Issues in Auditing

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SUMMARY: This study examines the work environment in the audit division of large public accounting firms. Based on 18 semi-structured interviews (eight partners and ten staff auditors currently or recently employed by large public accounting firms), we find that the interviewees cite several positive aspects of auditing careers including the people, intellectual stimulation, challenge, and responsibility. However, they also cite significant negatives, including PCAOB regulation, stress, and hours. None of the staff interviewees plans to stay in public accounting long term, and while all of the partners would recommend public accounting to others, most focused only on public accounting as a place to start a career. The findings raise a number of concerns regarding the profession's ability to sustain the quality of its human capital, especially since there are no signs of a radically improved work environment in public accounting that may appeal to Millennials. We conclude by discussing possible improvements in the public accounting work environment that would address the issues raised in the interviews.

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Section: Selected Recent Researchmentioning

confidence: 99%

“…For insights into such issues, see Daugherty and Tervo (2010), Houston andStefaniak (2013), andJohnson, Keune, andWinchel (2014). In addition, we emphasize that this is not a broad, large sample survey.…”

Section: Introductionmentioning

confidence: 99%

The Work Environment in Large Audit Firms: Current Perceptions and Possible Improvements

Hermanson

Houston

Stefaniak

et al. 2016

Current Issues in Auditing

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“…Tetlock (1983) found that people expressed liberal attitudes when being assessed by a liberal and conservative views when being assessed by a conservative. As a result, auditors may feel that they are more likely to be held accountable for the content of their audit files and may be penalised if problems are uncovered (ASIC, 2013;Peecher et al, 2013;Johnson et al, 2014;Dowling et al, 2015). In auditing, the advent of regulator inspections and partner rotation mean that audit files are more likely to be scrutinised by parties external to the team that conducted the audit.…”

Section: Regulation and Accountabilitymentioning

confidence: 99%

“…working within firm policies and procedures) as these qualities should aid in the attainment of a clean report from the regulator and help the firm avoid regulatory penalties (ASIC, 2013;Peecher et al, 2013;Johnson et al, 2014). In this scenario, better personnel means allocating auditors with more technical knowledge (i.e.…”

Section: The Effect Of An Anticipated Inspection On the Need For Knowmentioning

confidence: 99%

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The effect of inspections, rotations and client preferences on staffing decisions

Moroney

Knechel

Dowling

2017

Accounting & Finance

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With increased regulatory focus on audits and concerns about whether audit regulation is achieving its stated aims, it is timely to investigate how regulator inspection of audit files and partner rotations may be affecting staffing decisions. This is an important issue, which affects all audits, as the calibre of staff allocated across engagements impacts the quality of audit work delivered. This study reports the results of an experiment where auditor participants allocate staff across two audits, where regulation anticipated (none, inspection, rotation) and a client request for the best staff (absent, present) are manipulated between-subjects. We find that auditors allocate lower calibre staff when neither an inspection nor rotation is anticipated than when either is anticipated. When an inspection is anticipated, auditors allocate staff with more knowledge and compliance skills. When a rotation is anticipated, auditors allocate staff with more people skills. A client request for the best staff only has an effect when a partner is due to be rotated, where auditors allocate staff with more people skills in response to the client request. Our findings provide greater understanding of staffing decisions, which may affect audit quality if concerns around audit inspections and partner rotations are perceived by auditors as more important than the underlying risk or complexity of an engagement when allocating staff.

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PCAOB inspections: An analysis of entity-level and application-level control audit deficiencies

Mascha

Lamboy-Ruiz

Janvrin

2018

International Journal of Accounting Information Systems

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The Public Company Accounting Oversight Board (PCAOB) inspection process identifies deficiencies related to how firms conduct audits. Our work extends prior research by examining the type of internal control audit deficiencies (entity-level or application-level). Internal control audit deficiencies of both types may increase the risk of material misstatement, so the PCAOB is concerned with whether audit firms are performing appropriate procedures to identify entity-level and application-level internal control audit deficiencies, including those involving information technology general controls (ITGCs). Using text analysis to examine audit deficiencies by internal control type and firm size, we find that PCAOB inspection reports identify significantly more application-level than entity-level control audit deficiencies. Application-level control deficiencies generally involve revenue, inventory, and accounts receivable accounts whereas entity-level deficiencies often involve lack of centralized controls or controls over period end financial reporting. The number of application-level deficiencies identified for both Big 4 and second-tier firms varied between inspection years 2010 and 2015. However, the number of entity-level deficiencies, including ITGCs for both Big 4 and second-tier firms, held nearly steady during the period. Our findings should be of interest to practicing accountants, regulators, and other users of PCAOB inspection reports.

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Auditors' Perceptions of the PCAOB Inspection Process

Cited by 17 publications

References 54 publications

The Work Environment in Large Audit Firms: Current Perceptions and Possible Improvements

The Work Environment in Large Audit Firms: Current Perceptions and Possible Improvements

The effect of inspections, rotations and client preferences on staffing decisions

PCAOB inspections: An analysis of entity-level and application-level control audit deficiencies

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