Evidence of the Relationship between PCAOB Inspection Outcomes and the Use of Structured Audit Technologies

Abstract

SUMMARYWe investigate the relationship between Public Company Accounting Oversight Board (PCAOB) inspection outcomes and auditors' use of structured audit technologies (SATs) by conducting interviews with audit partners of firms inspected annually by the PCAOB, surveying triennially-inspected auditing firms, and relating auditors' reported SAT adoptions and use with their firm-specific inspection outcomes. It has been observed that auditors are adopting SATs to improve PCAOB inspection outcomes. While our evidence is consistent with this observation and motivation, we do not find evidence that SATs are an effective strategy to improve inspection outcomes. We discuss the potential reasons for this inconsistency, the most important of which may be auditors' expressed concerns about the negative impact SATs have on auditors' critical thinking skills, professional judgment, and skepticism. Supplemental tests relating auditors' SAT adoptions to their client-specific audit fees also provide initial support for auditors' reports that SATs are efficient audit tools.