Does PCAOB inspection access improve audit quality? An examination of foreign firms listed in the United States

2016 ◽  
Vol 61 (2-3) ◽  
pp. 313-337 ◽  
Author(s):  
Phillip T. Lamoreaux
Keyword(s):  
United States ◽  
Audit Quality ◽  
The United States ◽  
Foreign Firms

An Examination of Audit Quality Surrounding Within-Firm Engagement Office Changes

2021 ◽  
pp. 0148558X2110596
Author(s):  
Adam J. Greiner ◽  
Julia L. Higgs ◽  
Thomas J. Smith
Keyword(s):  
United States ◽  
Knowledge Transfer ◽  
Empirical Evidence ◽  
Audit Quality ◽  
Resource Constraints ◽  
Discretionary Accruals ◽  
The United States ◽  
Primary Analysis ◽  
Quality Deterioration ◽  
Main Association

We examine the relation between within-firm office changes and audit quality in the United States. Our primary analysis documents a reduction in audit quality, measured using abnormal discretionary accruals and restatements, when the client is transferred to a smaller within-firm office (downsize effect). We are unable to find evidence that clients experience significant improvement in audit quality among transfers to a larger within-firm office (upsize effect). We then condition our sample on the change in the number of public clients of the receiving office to better understand the source of the underlying association. We find that our downsize effect is driven by offices experiencing a decrease in the number of public clients, suggesting that our main association is not entirely the result of resource constraints for the receiving office. We posit that this finding is consistent with audit quality deterioration among within-firm office changes to smaller offices driven, in part, by the receiving office’s inability to adequately overcome the knowledge transfer frictions that accompany a move to a new office. Our findings offer empirical evidence on consequences of within-firm office changes and are particularly relevant to regulators and preparers.

China—US Trade War: A Modern Version of the Thucydides Trap

2018 ◽  
Vol 10 (04) ◽  
pp. 5-23
Author(s):  
Yuqing XING
Keyword(s):  
United States ◽  
European Union ◽  
The United States ◽  
Foreign Firms ◽  
Level Playing Field ◽  
The European Union ◽  
Chinese Consumers ◽  
Playing Field ◽  
Thucydides Trap ◽  
Trade War

China—US trade war looks like a modern version of the Thucydides Trap. The devastating consequences of the trade war can be avoided if China takes the drastic step to open its market to US firms and allow foreign firms to have a level playing field to compete with Chinese firms. It is time that Chinese consumers embrace products “made beyond China”. Strengthening economic cooperation with the European Union (EU) and Japan would give China the leverage to counterbalance the pressure of the United States. China, however, should be ready to offer significant concessions in opening its domestic market too.

Audit Partner Assignments and Audit Quality in the United States

2018 ◽  
Vol 94 (2) ◽  
pp. 297-323 ◽  
Author(s):  
Hye Seung (Grace) Lee ◽  
Albert L. Nagy ◽  
Aleksandra B. Zimmerman
Keyword(s):  
United States ◽  
Boards Of Directors ◽  
Audit Quality ◽  
Audit Fees ◽  
The United States ◽  
Top Management Teams ◽  
Demand And Supply ◽  
Gender Diverse ◽  
Partner Characteristics ◽  
Partner Gender

ABSTRACT This paper examines the demand- and supply-side factors associated with audit partner selection and assignment in the United States. First, we examine whether audit partner gender and experience are associated with board and management gender and experience. Second, we investigate whether engagement audit quality varies with audit partner gender and experience, controlling for selection effects. The results indicate that companies with more gender-diverse boards of directors and top management teams are more likely to have a female lead audit partner. In addition, the experience of the client's board is positively associated with the experience of the lead audit partner. In terms of audit quality, we find that higher audit fees are positively associated with female and more experienced audit partners. Our results shed light on the important role that partner characteristics play in the demand and supply sides of audit quality.

Mandatory Audit Partner Rotations and Audit Quality in the United States

2020 ◽  
Vol 39 (3) ◽  
pp. 161-184
Author(s):  
Huan Kuang ◽  
Huimin Li ◽  
Matthew G. Sherwood ◽  
Robert L. Whited
Keyword(s):  
United States ◽  
Audit Quality ◽  
Financial Statements ◽  
The United States ◽  
Data Availability ◽  
Control Groups ◽  
Audit Firm ◽  
Mandatory Rotation ◽  
Audit Partner Rotation ◽  
Important Evidence

SUMMARY This study uses a sample of mandatory partner rotation events hand collected from SEC filings to investigate the relation between mandatory audit partner rotation and audit quality in the United States. Across a variety of control groups and audit quality proxies, we do not find evidence consistent with rotation materially improving audit quality (i.e., “fresh look”). Although somewhat limited, the only statistically significant evidence we document suggests that audited financial statements may be more likely to contain a material misstatement (i.e., subsequently be restated) following a mandatory audit partner rotation, particularly when the audit firm tenure is short. We also provide evidence from client disclosures that mandatory rotation rules trigger auditor-client realignment. Together, our results provide important evidence on the merits of mandatory partner rotation rules in the United States. JEL Classifications: M40; M41; M42. Data Availability: Data are publicly available from sources identified in the article.

SEC fines non-US entities for unregistered cross-border brokerage and advisory activities

2017 ◽  
Vol 18 (1) ◽  
pp. 75-77
Author(s):  
James Burns ◽  
Kimberly Beattie Saunders
Keyword(s):  
United States ◽  
Asset Management ◽  
Financial Services ◽  
Financial Institution ◽  
The United States ◽  
Securities And Exchange Commission ◽  
Foreign Firms ◽  
Content Type ◽  
Regulatory Guidance ◽  
The Us

Purpose To explain a settlement involving a foreign financial institution, its non-US subsidiaries, and the US Securities and Exchange Commission (“SEC”) that reveals an SEC focus on policing the activities of foreign firms that reach into the United States and helps further define the scope of activities that require registration under the federal securities laws. Design/methodology/approach Provides insight into a recent area of focus for SEC regulators and introduces the potential regulatory implications for non-US firms with activities that reach into the United States. Findings Given the SEC’s current enforcement focus, it is critical that financial institutions take care to conduct their activities with an understanding of the regulatory requirements associated with the provision of brokerage and advisory services to US clients and customers – including, for many firms, registration as an investment adviser, broker-dealer, or both. Originality/value Practical regulatory guidance regarding SEC registration requirements that may reach non-US firms from experienced financial services lawyers specializing in asset management.

scholarly journals Auditing Issues with Chinese Reverse Merger Companies Traded in the United States

2012 ◽  
Vol 2 (2) ◽  
pp. 76
Author(s):  
Frederic M. Stiner ◽  
Susan A. Lynn
Keyword(s):  
United States ◽  
Audit Quality ◽  
The United States ◽  
Auditor Independence ◽  
Securities And Exchange Commission ◽  
Future Research ◽  
Chinese Government ◽  
The Public ◽  
Reverse Mergers ◽  
Public Company

Recently there have been two issues related to Chinese companies seeking capital in the United States.   The first issue is frauds that have been perpetrated by companies using reverse mergers in order to go public.   The second issue is fraud in continuing audit engagements when there has been reliance by an American audit firm on a foreign accountant’s audit work.  There is also conflict between the Public Company Accounting Oversight Board (PCAOB) demanding to inspect audit workpapers for companies in China and the Chinese government’s refusal to let the PCAOB see these workpapers.   These issues relate to characteristics of the practice of accounting and auditing in China that threaten auditor independence and audit quality. The paper discusses: (1) issues involving reverse mergers and the response of the Securities and Exchange Commission (SEC) to these issues, (2) issues involving reliance on the work of foreign Certified Public Accountants (CPAs) and the response of the PCAOB to these issues, (3) issues involving conflicts between U.S.  regulatory agencies and the Chinese government over access to audit-related documents, and (4) suggestions for future research.

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