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Auditing the auditors: Evidence on the recent reforms to the external monitoring of audit firms

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  • Lennox, Clive
  • Pittman, Jeffrey

Abstract

This paper analyzes audit firm supervision since the Public Company Accounting Oversight Board (PCAOB) began conducting inspections. First, we find that audit clients do not perceive that the PCAOB's inspection reports are valuable for signaling audit quality. Second, we document that the information content of peer review reports fell after they became narrower in scope with the initiation of PCAOB inspections. Third, we isolate that the signaling role of peer review reports mainly stems from information that PCAOB inspectors do not publicly disclose. Collectively, our evidence implies that less is known about audit firm quality under the new regulatory regime.

Suggested Citation

  • Lennox, Clive & Pittman, Jeffrey, 2010. "Auditing the auditors: Evidence on the recent reforms to the external monitoring of audit firms," Journal of Accounting and Economics, Elsevier, vol. 49(1-2), pages 84-103, February.
    • Handle: RePEc:eee:jaecon:v:49:y:2010:i:1-2:p:84-103
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    References listed on IDEAS

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    6. Gilles Hilary & Clive Lennox, 2005. "The Credibility of Self-Regulation: Evidence from the Accounting Profession's Peer Review," Post-Print hal-00482306, HAL.
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    Keywords

    Regulation Sarbanes-Oxley act PCAOB;

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