Standard-setting in auditing: Insights from PCAOB inspections

Boland, Colleen M.; Brown, Veena L.; Dickins, Denise

doi:10.1016/j.jaccpubpol.2020.106756

Cited by 9 publications

(7 citation statements)

References 30 publications

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“…Shortly after his appointment, Doty announced an increased emphasis on enforcement actions (Herron and Gilbertson 2011). Relatedly, findings associated with PCAOB inspections of the Big 4 auditing firms increased from 1.22 per issuer-audit inspected in 2011 and 2012, to 1.63 in 2013 (Boland et al 2020). As Claudius Modesti served as Director of Enforcement and Investigations from 2004 to 2018, a change in leadership in the PCAOB's enforcement group is not a likely explanation for these changes.…”

Section: Pcaob Enforcementmentioning

confidence: 99%

The Influence of Political Regime on State-Level Disciplinary Actions of CPAs Sanctioned by the PCAOB

2021

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We investigate whether enforcement is influenced by politics by comparing the severity of PCAOB sanctions of individual CPAs to the severity of related state-level disciplinary actions imposed by boards of accountancy (BOAs). Our results provide evidence that when responding to PCAOB sanctions, BOAs under Republican regimes impose less severe penalties than do BOAs under Democratic regimes. Our data and analyses inform the regulatory and enforcement practices of the accounting profession and other professions. Most directly, motivated by improvements in technology that facilitate the cross-jurisdiction practice of public accounting, states have adopted mobility laws where CPAs are only required to be licensed in their state of residence to practice in multiple states. These laws simplify licensing but may complicate enforcement. Beyond generalized red-state, blue-state differences in enforcement, we find that non-resident CPAs receive less severe disciplinary actions. If not reasonably consistent across BOAs, regulators may be unwilling to delegate responsibility for enforcement to another state's BOA.

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Section: Pcaob Enforcementmentioning

confidence: 99%

The Influence of Political Regime on State-Level Disciplinary Actions of CPAs Sanctioned by the PCAOB

2021

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“…In light of these challenges, auditing firms have devised a variety of strategies with the objective of ensuring the continued provision of audit services that exhibit exceptional quality. The strategies that were put into effect involved replacing in-person meetings with remote interactions, as well as increasing the frequency of communication with firm managers, audit committees, and engagement teams (Boland, Brown, & Dickins, 2020). Several companies have also adopted virtual inventory observations as an alternative to conducting physical asset inspections (Boland et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Firm Performance: An Analysis of Financial Policy and Audit Quality in Pakistan

Kamran,

Shami,

Khan

et al. 2023

JAFEE

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Purpose: Having effective and well-structured financial policies is essential for a company's success. These policies provide the foundation for measuring and analyzing an organization's performance through a robust financial management system. This study introduces a novel element, namely, audit quality, to enhance our understanding of how financial policies impact a firm's performance. The primary objective of this research is to delve deeper into whether audit quality plays a moderating role in the relationship between financial policies and a firm's performance. Design/Methodology/Approach: Discretionary accruals were calculated using a regression model, and descriptive analysis was employed to analyze the data. Findings: The results of the study reveal that the connection between free cash flow, agency costs, and a firm's performance is significantly influenced by audit quality. This research particularly offers valuable insights into the manufacturing sector, where performance is of paramount importance. Implications: By considering the interplay of financial policy, audit quality, and firm performance, businesses and policymakers can make more informed decisions that contribute to the overall prosperity of the Pakistani corporate sector.

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“…As one of the recommendations made by the new Guidance Statement GS 005 of the AUASB, the aim of having such a conversation is to improve audit quality by ensuring that all involved parties agree upon the use of the experts' work and the approach used towards its completion (GS 005, para 22). Although the Guidance Statements are recommendations and are not authoritative, whether a recommendation has achieved its intended goal is critical to the standard‐setting process as monitoring of the outcomes of a standard can lead to further amendments or new standards (Boland, Brown, & Dickins, 2020).…”

Section: Introductionmentioning

confidence: 99%

External auditors' reliance on management's experts: The effects of an early‐stage conversation and past auditor–client relationship

2021

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This study examines the impact of an early‐stage conversation with a management's expert on auditors' decisions within the context of auditor–client relationships. We conducted a 2 × 2 between‐subjects experiment with 69 experienced auditors in Australia. Our results suggest that an early‐stage conversation can adversely affect perceived client flexibility towards proposed audit adjustments, particularly under contentious client conditions. Our results further indicate that an early‐stage conversation results in auditors relaxing, which otherwise might be a more contentious approach towards difficult clients. While we do not find direct evidence that auditors succumb to pressure and accept the work of the management's expert without any changes, our results suggest that auditors are willing to propose an adjustment that meets the interests of both auditor and client.

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Standard-setting in auditing: Insights from PCAOB inspections

Cited by 9 publications

References 30 publications

The Influence of Political Regime on State-Level Disciplinary Actions of CPAs Sanctioned by the PCAOB

The Influence of Political Regime on State-Level Disciplinary Actions of CPAs Sanctioned by the PCAOB

Firm Performance: An Analysis of Financial Policy and Audit Quality in Pakistan

External auditors' reliance on management's experts: The effects of an early‐stage conversation and past auditor–client relationship

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