Reining in auditors: On the dynamics of power surrounding an “innovation” in the regulatory space

In the aftermath of Enron and the collapse of Arthur Andersen, new “independent” institutions were created to oversee financial auditing. Based on a modified version of Lukes’ multidimensional model of power, we first investigate how the creation of the Canadian Public Accountability Board (CPAB) has affected the dynamics of power among the main players enlisted in Canada’s regulation of public accounting. Our findings strengthen the view that a “form of allegiance” was, at the time of data collection, developing between CPAB and the largest Canadian accounting firms. Through a second analytical movement, we extend the boundaries of our argument, showing that patterns of resistance against the logic of arm’s length regulation operate in a variety of audit regulatory sites. Our conclusion points, in particular, to the spatial gap - and incidentally the limitations - of any attempt to control and supervise a globalized industry from a national or regional perspective.     

Including audit regulation in the accounting curriculum

Audits and auditors are regulated to uphold audit quality, thus regulation is important to the public interest and clearly impacts firms and CPAs. Moreover, the reach of audit regulation has expanded greatly in the last decade with the establishment of the Public Company Accounting Oversight Board (PCAOB). Recent research and calls from the profession point to enhancing the coverage of audit regulation in the accounting curriculum so that students understand the consequences of failing to adhere to professional standards. In this paper, we propose regulatory content for inclusion in the curriculum, we survey and catalog existing auditing textbooks and other educational materials for regulatory content, and we suggest flexible alternatives for incorporating this topic into the curriculum. It is our hope that, with these resources, faculty can more effectively include audit regulation in the classroom and achieve a high level of student comprehension and learning on the topic.     

会计师事务所鉴证企业内控报告的理性思考

本文以《萨班斯-奥克斯利法案》第404号条款、美国公众公司会计监督委员会颁布实行的第二号审计准则以及我国于2006年7月1日推出的《上海证券交易所上市公司内部控制指引》作为开展研究的社会历史背景,把会计师事务所作为一个外部的审计实体,对于鉴证企业内控报告这项新业务的开展,探讨其在现实经济生活中的重要性及实际开展中可能存在的问题,并就完善内控报告鉴证业务的实际开展提出建议。     

The effect of small audit firms’ failure to remediate the PCAOB’s quality control criticisms on audit market segmentation

This paper examines the role of the Public Company Accounting Oversight Board (PCAOB) quality control inspection program on market segmentation of small firms’ audit services. Specifically, we investigate how non-remediation of quality control criticisms (QCCs) affects the supply and demand of low-quality audits. We find that remediation of QCCs improves audit quality for small accounting firms. However, some small accounting firms do not remediate QCCs (NR firms) and continue to provide low audit quality. We investigate how NR clients react to the disclosure of non-remediation of QCCs. We find that NR clients with low agency costs are more likely to retain NR firms after the disclosure of non-remediation. This finding is consistent with our expectation that voluntary QCC remediation creates a low-quality audit market segment for NR firms. Our findings suggest that the public disclosure of QCCs is not sufficient to remove low-quality auditors. Instead, NR clients use the disclosure of non-remediation of QCCs as a signal to sort themselves into segments based on their demand for audit quality. We are the first to study and find that PCAOB inspections, and specifically the voluntary nature of remediation and public disclosure of lack of remediation, create market segmentation.     

注册会计师行业独立型监管模式有效性研究——基于美国PCAOB运作情况的分析

独立型监管机构具有更高的独立性、更大的法定权威和更集中的监管权限等有利条件,但缺乏基于社会声誉的权威,同时存在外部约束弱化、过度监管和行业专门知识利用不足等问题.独立型监管模式的有益经验值得借鉴,但必须注意其有效性不是无条件的.我国可考虑设立类似于美国PCAOB的相对独立、专司其职、权限集中、有充分法律授权和充足经费保障的监管机构,但须深入分析我国国情,设计出在权威、激励和知识三个维度上均能提高监管效率的改革方案.