PCAOB inspection deficiencies and future financial reporting quality: Do the types of deficiencies matter?

IF 3.2 3区 管理学 Q1 BUSINESS, FINANCE
Patience Constance, Clive Lennox, Chan Li
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Abstract

This study examines whether PCAOB inspection reports are useful for signaling the risk of misstatements in future periods and the extent to which different types of audit deficiencies predict future misstatements. We find that, after the inspection report is issued, PCAOB-identified audit deficiencies are positively associated with future misstatements for the audit firm's entire client portfolio. When we examine different types of deficiencies, we find that an auditor's failure to understand the client's accounting procedures or policies is the most detrimental type of deficiency for future reporting quality. We also examine the deficiency types for Big 4 versus non–Big 4 firms separately. The results show that an auditor's failure to understand the client's accounting procedures or policies is the only deficiency type that is positively associated with future misstatements for Big 4 firms. For non–Big 4 firms, however, future misstatements are predicted by an auditor's failure to understand the client's accounting procedures or policies, inadequate substantive testing, and inadequate going-concern assessments. Our study has important implications given the concerns raised by auditors regarding the usefulness of PCAOB inspections.

Abstract Image

PCAOB检查缺陷与未来财务报告质量:缺陷类型重要吗?
本研究考察了PCAOB检查报告是否有助于指示未来期间的错报风险,以及不同类型的审计缺陷在多大程度上预测未来的错报。我们发现,在检查报告发布后,pcaob发现的审计缺陷与审计公司未来对整个客户组合的错报呈正相关。当我们检查不同类型的缺陷时,我们发现审计师不了解客户的会计程序或政策是对未来报告质量最有害的缺陷类型。我们还分别考察了四大会计师事务所与非四大会计师事务所的缺陷类型。结果表明,审计师未能理解客户的会计程序或政策是与四大会计师事务所未来错报呈正相关的唯一缺陷类型。然而,对于非四大会计师事务所,未来的错报是由审计师不了解客户的会计程序或政策、不充分的实质性测试和不充分的持续经营评估来预测的。鉴于审计师对PCAOB检查的有效性提出的担忧,我们的研究具有重要的意义。
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来源期刊
CiteScore
6.20
自引率
11.10%
发文量
97
期刊介绍: Contemporary Accounting Research (CAR) is the premiere research journal of the Canadian Academic Accounting Association, which publishes leading- edge research that contributes to our understanding of all aspects of accounting"s role within organizations, markets or society. Canadian based, increasingly global in scope, CAR seeks to reflect the geographical and intellectual diversity in accounting research. To accomplish this, CAR will continue to publish in its traditional areas of excellence, while seeking to more fully represent other research streams in its pages, so as to continue and expand its tradition of excellence.
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