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Auditors' Perceptions of the PCAOB Inspection Process

SSRN Electronic Journal
2018
  • 22
    Citations
  • 1,789
    Usage
  • 6
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    22
    • Citation Indexes
      22
  • Usage
    1,789
    • Abstract Views
      1,512
    • Downloads
      277
  • Captures
    6
  • Ratings
    • Download Rank
      221,146

Article Description

This study examines U.S. auditors’ observations of the PCAOB inspection process, and its impact on their work, in order to understand the current U.S. regulatory audit climate. Using 20 interviews with experienced auditors, we consider behavioral factors (e.g., perceived power of and trust in the PCAOB) that can impact the level and form of auditor compliance according to theory from the slippery slope framework on audit regulation (Kirchler et al. 2008; Dowling et al. 2018). Our participants described an audit climate with a powerful regulator. They reported that their desire to receive “clean” inspection reports has had a substantial impact on audit procedures and quality control. However, our participants do not appear to have high trust in the PCAOB, as they questioned aspects of the inspection process and its expectations. Accordingly, we conclude that U.S. public company auditors operate in an antagonistic environment where auditors perceive the PCAOB has high coercive power. In other words, they comply due to fear of enforcement rather than agreement with the PCAOB’s views on audit quality. Some auditors also indicated that they consider both the costs and benefits of compliance. Theoretical intuition implies that any future increases to perceived costs relative to perceived benefits of compliance could ultimately decrease the PCAOB’s coercive power and reduce U.S. auditor compliance. Our findings have implications for regulators and researchers interested in understanding behavioral factors that may influence regulatory compliance.

Bibliographic Details

Lindsay Johnson; Marsha B. Keune; Jennifer Winchel

Elsevier BV

audit regulation; PCAOB inspections; audit deficiencies; compliance

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