The effect of PCAOB inspections on Big 4 audit quality

  • Carcello J
  • Hollingsworth C
  • Mastrolia S
  • 68

    Readers

    Mendeley users who have this article in their library.
  • 39

    Citations

    Citations of this article.

Abstract

This paper examines whether the PCAOB inspection process results in an improvement in the quality of audits provided by Big 4 firms. We measure audit quality by examining changes in auditee abnormal accruals following each of the first two PCAOB inspections. We find a significant reduction in abnormal accruals in the year following the first PCAOB inspection, and we find a further reduction in abnormal accruals in the year following the second PCAOB inspection. These results are generally stronger for auditees that reported positive abnormal accruals before the initial PCAOB inspection. Our results provide preliminary evidence that the PCAOB inspection process has led to improved audit quality, at least as measured by a reduction in auditee earnings management. © 2011.

Author-supplied keywords

  • Abnormal accruals
  • Audit quality
  • PCAOB inspection process

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • Joseph V. Carcello

  • Carl Hollingsworth

  • Stacy A. Mastrolia

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free