The Impact of the PCAOB Individual Engagement Inspection Process—Preliminary Evidence
研究PCAOB对个体审计业务的检查如何影响审计师和客户行为，发现检查结果会引发审计投入增加、客户更换审计师等反应，但未发现缺陷的审计业务后续质量下降。
ABSTRACT This study investigates the impact on auditors' and clients' activities of Public Company Accounting Oversight Board (PCAOB) inspections of individual engagements. I find that both auditors and clients react to a Part I Finding, which identifies audit deficiencies on their inspected engagements. Audit firm effort increases on inspected engagements and non-inspected engagements of offices or partners that receive a Part I Finding, suggesting direct, as well as spillover, effects of the PCAOB inspections. The client is also more likely to switch auditors. However, auditor effort and financial reporting quality subsequently decline for inspected engagements that did not receive a Part I Finding. In these cases, clients are less likely to switch auditors. Additional analyses show that the auditor reaction depends on whether the auditor is an industry specialist, the client reaction depends on the size of the auditor, and effects on financial reporting quality depend on whether the deficiency is a firm-wide issue. Overall, these results suggest that both audit firms and clients care about the PCAOB individual engagement inspection process and, in several instances, gravitate toward the level set by the Part I Finding bar. JEL Classifications: M42; M48.