Using Malmquist Indexes to measure changes in the productivity and efficiency of US accounting firms before and after the Sarbanes–Oxley Act

Omega ◽  
2009 ◽  
Vol 37 (5) ◽  
pp. 951-960 ◽  
Author(s):  
Hsihui Chang ◽  
Hiu Lam Choy ◽  
William W. Cooper ◽  
Timothy W. Ruefli
Keyword(s):  
Accounting Firms ◽  
Sarbanes Oxley ◽  
Before And After ◽  
Malmquist Indexes

scholarly journals The Impact of the Amendment of Taiwan’s Certified Public Accountant Act in 2007 on Large Accounting Firms

2021 ◽  
Vol 13 (3) ◽  
pp. 1229
Author(s):  
Chung-Cheng Yang ◽  
Jianxiong Chen ◽  
Wen-Chi Yang
Keyword(s):  
Policy Implications ◽  
Certified Public Accountant ◽  
Accounting Firms ◽  
Survey Report ◽  
Audit Firms ◽  
Before And After ◽  
Theory Of Law ◽  
Revenue Function ◽  
The Impact ◽  
Public Accountant

Taiwan’s Financial Supervisory Commission of the Executive Yuan promulgated the fully amended Certified Public Accountant Act in 2007, which directly led to significant changes in accounting law. From the perspective of the economic theory of law, this study investigates the amendment of the Certified Public Accountant Act resulting in an increase or decrease in the overall revenue and different revenue shares of accounting firms, and puts forward measures that should be taken by accounting firms and stakeholders. We focus on large accounting firms and divide the sample period into before and after 2008. This study uses the translog revenue function and revenue share functions of the public accounting industry, and based on the 1989–2017 Survey Report of Audit Firms in Taiwan, and we find that the amendment of the Certified Public Accountant Act has had a positive effect on overall revenue, increasing overall revenue and the overall management advisory services shares, and in reducing the overall accounting and auditing shares and tax services shares of large accounting firms. Additional analyses provide regulators with public policy implications and provide accounting firms with managerial information.

Audit Standard Setting and Inspection for U.S. Public Companies: A Critical Assessment and Recommendations for Fundamental Change

2009 ◽  
Vol 23 (2) ◽  
pp. 221-237 ◽  
Author(s):  
Steven M. Glover ◽  
Douglas F. Prawitt ◽  
Mark H. Taylor
Keyword(s):  
Standard Setting ◽  
The United States ◽  
Current Approach ◽  
Public Companies ◽  
Accounting Firms ◽  
Publicly Traded Companies ◽  
Sarbanes Oxley ◽  
Composition And Structure ◽  
Audit Standard ◽  
High Level

SYNOPSIS: The Sarbanes-Oxley Act of 2002 (SOX) established the Public Company Accounting Oversight Board (PCAOB) to oversee the accounting firms that audit publicly traded companies in the United States. In this commentary we outline why we believe the PCAOB’s audit standard-setting and inspection models are inefficient and dysfunctional. We assert that the Board’s ability to achieve its mission is limited by its early choices, together with its incentives, organizational composition, and structure. We support our assertions with a number of indicators of serious problems and flaws in the current approach. We also present high-level recommendations for change for policy makers, regulators, and leaders in the profession to consider in developing improved approaches to audit standard setting, inspection, and enforcement.

Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the PCAOB Rulemaking Docket Matter No. 31: PCAOB Release No. 2010-005, Application of the “Failure to Supervise” Provision of the Sarbanes-Oxley Act of 2002 and Solicitation of Comment on Rulemaking Concepts

2011 ◽  
Vol 5 (1) ◽  
pp. C11-C15 ◽  
Author(s):  
Joseph Brazel ◽  
James Bierstaker ◽  
Paul Caster ◽  
Brad Reed
Keyword(s):  
Audit Quality ◽  
Exposure Period ◽  
Public Accounting ◽  
Accounting Firms ◽  
Accounting Firm ◽  
The Public ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Auditing Standards ◽  
Supervision Practices

SUMMARY: Recently, the Public Company Accounting Oversight Board (“PCAOB” or “Board”) issued a release to address, in two ways, issues relating to the responsibilities of a registered public accounting firm and its supervisory personnel with respect to supervision. First, the release reminds registered firms and associated persons of, and highlights the scope of, Section 105(c)(6) of the Sarbanes-Oxley Act of 2002 (“the Act”), which authorizes the Board to impose sanctions on registered public accounting firms and their supervisory personnel for failing to supervise reasonably an associated person who has violated certain laws, rules, or standards. Second, the release discusses and seeks comment on conceptual approaches to rulemaking that might complement the application of Section 105(c)(6) and, through increased accountability, lead to improved supervision practices and, consequently, improved audit quality. The PCAOB provided for a 91-day exposure period (from August 5, 2010, to November 3, 2010) for interested parties to examine and provide comments on the conceptual approaches to rulemaking that might complement the application of Section 105(c)(6). The Auditing Standards Committee of the Auditing Section of the American Accounting Association provided the comments in the letter below to the PCAOB on the PCAOB Release No. 2010-005, Application of the “Failure to Supervise” Provision of the Sarbanes-Oxley Act of 2002 and Solicitation of Comment on Rulemaking Concepts.

Market Reaction to Auditor Switching from Big 4 to Third-Tier Small Accounting Firms

2010 ◽  
Vol 29 (2) ◽  
pp. 83-114 ◽  
Author(s):  
Hsihui Chang ◽  
C. S. Agnes Cheng ◽  
Kenneth J. Reichelt
Keyword(s):  
Stock Market ◽  
Audit Quality ◽  
Market Reaction ◽  
Accounting Firms ◽  
Auditor Switching ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Period 2 ◽  
Prior Literature ◽  
Second Tier

SUMMARY: After the demise of Arthur Andersen, the public accounting industry has witnessed a significant migration of public clients to second-tier (Grant Thornton and BDO Seidman) and smaller third-tier accounting firms. While prior literature documents that smaller auditors are perceived by the stock market as an inferior substitute for a Big 4 auditor, this perception appears to have changed in recent years. In this paper, we analyze market responses to auditor switching from Big 4 to smaller accounting firms during 2002 to 2006. We break our sample period into two separate periods (Periods 1 and 2) based on when regulatory changes occurred. These changes included Sarbanes-Oxley (SOX) 404 implementation, Public Company Accounting Oversight Board (PCAOB) inspections, and a tightened Form 8-K filing deadline. We find a relatively more positive stock market reaction to clients switching from a Big 4 to a smaller third-tier auditor in Period 2. This relatively more positive reaction in Period 2 reflects companies seeking better services rather than a lower audit fee, when an audit quality drop is less likely. Overall, our results suggest that companies and investors have become more receptive to smaller accounting firms.

An Analysis of SEC and PCAOB Enforcement Actions against Engagement Quality Reviewers

2010 ◽  
Vol 29 (2) ◽  
pp. 233-252 ◽  
Author(s):  
William F. Messier ◽  
Thomas M. Kozloski ◽  
Natalia Kochetova-Kozloski
Keyword(s):  
Securities And Exchange Commission ◽  
Future Research ◽  
Audit Process ◽  
Accounting Firms ◽  
Professional Skepticism ◽  
Quality Review ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Public Company ◽  
Quality Control Mechanism

SUMMARY: Engagement quality review is an integral part of the audit process. It is designed to be a quality control mechanism for assessing the quality of an audit engagement. Since the 1990s, the Securities and Exchange Commission (SEC) has increased sanctions against partners serving as engagement quality reviewers. Recently, the Public Company Accounting Oversight Board (PCAOB) issued an auditing standard on engagement quality review as required by Section 103 of the Sarbanes-Oxley Act of 2002. This practice note reports on an analysis of SEC and PCAOB enforcement actions against engagement quality reviewers (EQRs). Our results show the following: We identified 28 cases since 1993 that involve some type of sanction against an EQR. Only eight cases involved the Big 4/5 public accounting firms. All of the 28 cases involved sanctions due to violations of GAAS and 75 percent contained GAAP violations. Twenty-three cases identified GAAS violations related to a lack of due professional care. Further analysis of those cases showed that the EQR demonstrated a lack of professional skepticism in 22 cases, over-relied on management representations in 20 cases, and ignored materiality concerns in five cases. About half of the 28 cases resulted in the EQR being denied the privilege of practicing before the SEC or PCAOB for three or more years. Our findings provide important implications for practitioners and regulators, and areas for future research for those interested in engagement quality review.

scholarly journals After Sarbanes-Oxley: Market reaction to the appointment of outside directors

2006 ◽  
Vol 3 (3) ◽  
pp. 190-198
Author(s):  
Hatice Uzun ◽  
Elizabeth Webb
Keyword(s):  
Audit Committee ◽  
Market Reaction ◽  
Positive Impact ◽  
Abnormal Returns ◽  
Outside Directors ◽  
Stock Market Reaction ◽  
Sarbanes Oxley ◽  
Before And After ◽  
The Board Of Directors ◽  
Outside Director

This paper examines the stock market reaction to the appointment of outside directors to the board both before and after the passage of the Sarbanes Oxley Act in 2002. We also examine whether the abnormal returns following outside director appointments are related to audit committee appointments, and whether the outsider has financial expertise. Results show that the market response to the announcement of an appointment of an outsider to the board of directors is mixed, and abnormal returns are not significantly different after the passage of the Sarbanes-Oxley Act compared to those announcements before the Act. Also, we find that the market reaction pre- Sarbanes Oxley is higher when the outsider is expanding the board, lower in cases of CEO/chairman duality, and lower if the outsider is appointed to the audit committee. Post- Sarbanes Oxley CEO/chairman duality has a positive impact on the abnormal returns.

Comparing the Auditor Quality of Arthur Andersen to that of the Big 4

2006 ◽  
Vol 6 (1) ◽  
pp. 135-161 ◽  
Author(s):  
Ross D. Fuerman
Keyword(s):  
Audit Quality ◽  
Public Accounting ◽  
Securities Litigation ◽  
Accounting Firms ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Auditor Quality ◽  
The Individual ◽  
Arthur Andersen

This study compares the audit quality of Arthur Andersen with that of the Big 4 accounting firms. An expanded indicator of audit quality is developed based on the law of business misconduct literature and the legal process literature. A representation of audit quality is derived from an analysis of the legal actions initiated against these five large public accounting firms from 1996 to 2004. The legal action was partitioned into three year periods. In the first period, Arthur Andersen and the Big 4 evidenced no quality differential. In the second and third periods, the Big 4, in aggregate, rated higher on the audit quality indicator than did Andersen. The robustness of these findings is substantiated using multiple logistic regression and sensitivity analysis. When the individual firms are compared with Andersen, all four evidenced higher audit quality; three of the firms are significantly higher. This suggests that Andersen represents an outlier within the audit population. However, the analysis also indicates that overall audit quality declined in the period immediately following the passage of the Private Securities Litigation Reform Act of 1995. This suggests that the Sarbanes-Oxley Act provisions directed toward remedying auditing deficiencies is justified and not an overreaction to a “few bad apples.”

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