Does Public Company Accounting Oversight Board Regulatory Enforcement Deter Low-Quality Audits?

• 成果类型: Article
• 署名作者: Lamoreaux, Phillip T.; Mowchan, Michael; Zhang, Wei
• 署名单位: Arizona State University; Arizona State University-Downtown Phoenix; Baylor University; University of Massachusetts System; University of Massachusetts Amherst
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2020-0658
• 发表日期: 2023
• 页码: 335-366
• 关键词: firm membership; pcaob; inspections; improve; associations; INFORMATION; SANCTIONS; networks; PRIVATE; press

摘要

Regulatory economics suggests that one benefit of public enforcement is the deterrence of improper conduct. Using a difference-in-differences (DiD) design, we investigate whether a deterrence effect follows the revelation of Public Company Accounting Oversight Board (PCAOB) enforcement. We find that large audit firm offices improve audit quality following enforcement naming another office within their firm while small firm offices improve following enforcement of local small firm competitors, with these responses varying by enforcement type. To understand potential mechanisms for the geographic deterrence effect, we examine the first occurrence of a revoked PCAOB registration within a market and find that results are stronger if there is greater news coverage or if nonsanctioned firms are in closer proximity to the sanctioned auditor. Supplemental tests reveal that results are stronger when nonsanctioned auditor clients are similar to the sanctioned firm's clientele. Our findings suggest a positive but varied deterrence effect following PCAOB enforcement.