IDEAS home Printed from https://ideas.repec.org/a/taf/euract/v31y2022i2p345-376.html
   My bibliography  Save this article

PCAOB Inspections and Audit Fees: An Analysis of Inspection Rounds of Small Audit Firms

Author

Listed:
  • Ann Vanstraelen
  • Lei Zou

Abstract

This study investigates the impact on audit pricing of PCAOB inspection outcomes on the quality control systems of small audit firms. Quality control deficiencies (QCDs) provide a strong signal about audit quality, which is expected to lead to price changing. We first document that audit fees in the pre-inspection period were higher for small audit firms without QCDs, implying that quality differences were already partially known and priced in the market. Next, we find evidence that in the post-inspection period audit fees further increase for firms without QCDs, while there is limited evidence for fee increases for firms with remediated QCDs, suggesting changes in audit firm reputation. Interestingly, we do not find support for fee changes for audit firms with disclosed quality control deficiencies. Finally, the magnitude of change in audit fees decreases over time. Collectively, these findings contribute to our understanding of audit quality differences amongst small audit firms and the functioning of the small audit firm market.

Suggested Citation

  • Ann Vanstraelen & Lei Zou, 2022. "PCAOB Inspections and Audit Fees: An Analysis of Inspection Rounds of Small Audit Firms," European Accounting Review, Taylor & Francis Journals, vol. 31(2), pages 345-376, March.
    • Handle: RePEc:taf:euract:v:31:y:2022:i:2:p:345-376
    DOI: 10.1080/09638180.2020.1828121
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09638180.2020.1828121
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09638180.2020.1828121?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:euract:v:31:y:2022:i:2:p:345-376. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REAR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.