A Summary of 10 Years of PCAOB Research: What Have We Learned?

Abstract

On January 6, 2003, the Public Company Accounting Oversight Board (PCAOB) opened its Washington, D.C. office. Three days later, the PCAOB held its first open board meeting, affirming its position as the first external regulator of the auditing profession. The PCAOB was established six months earlier with the passage of the Sarbanes-Oxley Act (SOX) to protect the interests of investors and further the public interest in the preparation of informative, accurate and independent audit reports [U.S. Congress 2002]. Researchers, regulators, and practitioners have been attempting to understand the influence and effects of the PCAOB for over a decade. What impact has the PCAOB inspection process had on the auditing profession and audit quality? How do markets react to information disseminated by the PCAOB? How have PCAOB standards influenced auditor behavior? Accordingly, the objective of our paper is to review prior studies related to the four primary functions of the PCAOB (registration, standard-setting, inspections, and enforcement), provide answers to these questions to the extent possible given extant research, and suggest directions for future research to address unanswered questions.