Does the PCAOB international inspection program improve audit quality for non-US-listed foreign clients?

We examine whether the Public Company Accounting Oversight Board (PCAOB) international inspection program improves audit quality for a sample of non-US-listed foreign public client companies from 55 countries audited by foreign (i.e., non-US) auditors. For a sample of non-US-listed clients of PCAOB-...

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Bibliographic Details
Published in:Journal of accounting & economics 2017-08, Vol.64 (1), p.15-36
Main Authors: Fung, Simon Yu Kit, Raman, K.K., Zhu, Xindong (Kevin)
Format: Article
Language:English
Subjects:
Audit quality
Foreign auditors
Non-US-listed foreign public companies
PCAOB international inspection program
Positive externality
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Summary:We examine whether the Public Company Accounting Oversight Board (PCAOB) international inspection program improves audit quality for a sample of non-US-listed foreign public client companies from 55 countries audited by foreign (i.e., non-US) auditors. For a sample of non-US-listed clients of PCAOB-registered foreign auditors, we find that initial PCAOB inspections improve audit quality, over and above the threat of such inspections, for foreign auditors’ non-US-listed foreign clients. Our findings document the benefits of PCAOB international inspections for foreign investors in non-US-listed foreign companies which could increase the acceptability of the PCAOB international inspection program abroad.
ISSN:0165-4101
1879-1980
DOI:10.1016/j.jacceco.2017.04.002