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    PCAOB Inspections and Large Accounting Firms
    research summary posted September 17, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.06 Impact of PCAOB, 11.0 Audit Quality and Quality Control, 11.11 Impact of Firm and External Inspection Programs 
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    Title:
    PCAOB Inspections and Large Accounting Firms
    Practical Implications:

    Auditors should be interested in the results of this paper because the trends provide information both on emerging issues in accounting, as well as areas that are likely to be flagged by the PCAOB for inspection. For example, issues related to fair value measurement are growing as a percentage of overall issues. This may cause audit firms to examine their fair value accounting practices and training.

    For more information on this study, please contact Bryan K. Church.
     

    Citation:

    Church, B. K., and Shefchik, L. B. 2012. PCAOB Inspections and Large Accounting Firms. Accounting Horizons 26 (1): 43-63.

    Keywords:
    PCAOB inspections; inspection reports; regulation; audit quality.
    Purpose of the Study:

    This article gathers data from PCAOB inspection results and analyzes that data to determine trends in the auditing field. It presents these trends in a way that should be of interest to regulators, academics, practicing accountants, and users of the PCAOB's inspection reports.

    Design/Method/ Approach:

    Using PCAOB inspection reports from 2005 through 2010, the results of each inspection report is manually coded into different categories. Then, using linear regression, the article determines trends of interest in the audit engagements of the big four accounting firms as well as the four other annually inspected accounting firms.

    Findings:

    The article finds a number of trends, but some of the more important ones are:

    • Issues related to fair value measurement are growing as a percentage of overall issues
    • Total issues are declining
    • Revenue recognition is the most common problem area
       
    Category:
    Audit Quality & Quality Control, Standard Setting
    Sub-category:
    Impact of Firm & External Inspection Programs, Impact of PCAOB