Examining PCAOB disciplinary orders on small audit firms: Evidence from 2005 to 2018

Guo, Jun; Kinory, Ethan; Zhou, Yaou

doi:10.1111/ijau.12208

Cited by 3 publications

(1 citation statement)

References 62 publications

(86 reference statements)

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“…However, given the objective of this project, and with reference to extant research literature, we recommend that the IAASB give greater attention to the unique independence issues that are present in audits of less complex entities and liaise with the IESBA with a view to being satisfied that current ethical requirements around the provision of non‐assurance services (i.e., Section 600 of the Code) are fit for purpose and complement the application of the proposed standard. Guo et al (2021) review Public Company Accounting Oversight Board (PCAOB) disciplinary orders on small US domestic audit firms and find that concerns around auditor independence frequently arise. Small and medium audit practices tend to have closer connections to local businesses (Louis, 2005), and social bonding with owners/managers is a greater threat to independence in audits of less complex entities than is the case for larger, more complex entities (Langli & Svanström, 2014; Svanström, 2013).…”

Section: Responses To Specific Questionsmentioning

confidence: 99%

Comments of the AFAANZ auditing and assurance standards committee on proposed international standard on auditing ISA for LCE

Coram

Garg

et al. 2022

Accounting & Finance

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| 4221 3. We believe that the authority may lead to confusion as to the applicability of the standard in that it will likely contribute to a disconnect between what is perceived to be a less complex entity and entities scoped into the standard. We recommend that the IAASB consider placing less emphasis on global prohibitions and place more emphasis on qualitative characteristics and jurisdictional discretion. (Question 3b) 4. We do not believe that the authority itself informs audit report users of the scope of the proposed standard and recommend that this be addressed by other means (e.g., education). (Question 3d) 5. We believe that the role of legislative and regulative authorities is appropriate. (Question 3e) 6. We do not agree with the use of specific prohibitions and believe that greater emphasis should be placed on jurisdictional discretion, and a greater focus be placed on principlesbased qualitative criteria. (Question 4a) 7. We broadly agree with the qualitative characteristics specified, but recommend, following comments in response to other questions, that the criteria be expanded to include circumstances for which the auditor needs to refer to the full suite of standards and the need to use a component auditor. (Question 4b) 8. We suggest that the approach employed in developing the ED-ISA for LCE is problematic in that it is based on the material contained in the extant suite of standards. This approach gives rise to the potential for key issues not included in the extant suite of standards, but critical to the achievement of reasonable assurance in an audit of less complex entities, being omitted from the standalone standard. (Question 7a) 9. We believe that the material on professional scepticism, relevant ethical requirements and quality management is incomplete and does not fully reflect the unique circumstances in which an audit of a less complex entity is undertaken. (Question 7c) 10. We believe that Parts 1, 3 and 6 of ED-ISA for LCE can be improved. We also believe that ISA610 (Using the work of an Internal Auditor) should not be excluded from the standard. (Question 9) 11. We broadly agree with the approach taken with regard to auditor reporting in that specific reference is made to the auditing standard with which the auditor's opinion is formed. We caution, however, that an unintended consequence may be that users incorrectly infer meaning from the use of the standalone standard and may perceive that a lower level of assurance is provided. We suggest that a broad education program would be necessary to address this potential unintended consequence. (Question 10a) 12. We agree with the approach to include a specified format and content of an Auditor's Report as a requirement. (Question 10b) 13. We do not believe that ED-ISA for LCE in its current form will meet the needs of stakeholders. We do not, however, discount the possibility of a revised standalone standard achieving the goal of meeting current challenges associated with audits of less complex entities. (Question 17b) 14. We bel...

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Section: Responses To Specific Questionsmentioning

confidence: 99%

Comments of the AFAANZ auditing and assurance standards committee on proposed international standard on auditing ISA for LCE

Coram

Garg

et al. 2022

Accounting & Finance

View full text Add to dashboard Cite

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Earnings Management, Auditor Changes and Ethics: Evidence from Companies Missing Earnings Expectations

Lohwasser

Zhou

2023

J Bus Ethics

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Evaluating Audit Oversight Board’s Regulatory Impact: Analysis of Sanctions Imposed on Malaysian Audit Firms

MOHD ALI,

MAHAT,

MOHD SEHAT

et al. 2024

IMBR

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This study analyzes the 12-year trend of cases involving auditor wrongdoing as disclosed on the Audit Oversight Board (AOB) Malaysia's website from 2012 to 2023. Utilizing content analysis, the research examines the nature, frequency, and severity of penalties or sanctions imposed on audit firms for various offenses. Findings indicate a dynamic pattern of regulatory actions, reflecting Malaysia's evolving landscape of audit quality and regulatory oversight. It was revealed that a total of 56 breaches of the Securities Commission Act 1993 involving 30 audit firms were reported and disclosed by the Audit Oversight Board over the period from 2012 to 2023. The findings revealed that most misconduct cases relate to the failure of audit firms to comply with the requirements of International Auditing Standards, International Standard on Quality Control and Malaysian Institute of Accountant By-Laws. There has been a notable decrease in cases involving auditors over the past six years. This could also indicate the dedication of the AOB to monitoring auditors' conduct to prevent their involvement in malpractice. This study contributes to the understanding of audit regulation effectiveness and the behavioral patterns of auditors in response to regulatory scrutiny.

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Examining PCAOB disciplinary orders on small audit firms: Evidence from 2005 to 2018

Cited by 3 publications

References 62 publications

Comments of the AFAANZ auditing and assurance standards committee on proposed international standard on auditing ISA for LCE

Comments of the AFAANZ auditing and assurance standards committee on proposed international standard on auditing ISA for LCE

Earnings Management, Auditor Changes and Ethics: Evidence from Companies Missing Earnings Expectations

Evaluating Audit Oversight Board’s Regulatory Impact: Analysis of Sanctions Imposed on Malaysian Audit Firms

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