Title

The Impact of PCAOB Auditing Standard No. 5, the PCAOB Inspection Regime, and the Great Recession on Audit Fees and Audit Quality

Document Type

Article

Publication Date

12-31-2020

Abstract

We investigate the coinciding effects of the implementation of Auditing Standard No. 5 (AS5), the change in the Public Company Accounting Oversight Board’s (PCAOB) inspection regime, and the Great Recession on the audit fees and audit quality of accelerated filers. AS5 took effect in November 2007 and promulgated a top-down, risk-based audit approach to SOX 404(b) audits of accelerated filers. Concurrently, the PCAOB adopted a stricter approach to its inspections of audit firms, which encouraged them to improve audit quality and reduce audit fees. Moreover, the Great Recession pressured audit firms to reduce fees. We find that, following the three events, audit fees decreased and quality increased for accelerated filers. We also find that audit fees and audit quality increased for non-accelerated filers, although these filers were not directly affected by AS5.

Publication Source (Journal or Book title)

Journal of Accounting, Auditing & Finance

First Page

0148558X2098220

This document is currently not available here.

COinS