Audit and legal implications of PCAOB’s inspections among BRIC

Abstract

Purpose

This paper aims to analyze Public Companies Accounting Oversight Board (PCAOB) inspection reports on audit reports of those inspected accounting firms in Brazil, Russia, India and China (BRIC). In meeting the requirements of the Sarbanes-Oxley Act, the PCAOB conducts inspections on audit reports of firms listed on the New York Stock Exchange.

Design/methodology/approach

The reports include those submitted by both the US audit parent firms and their secondary firms located outside the USA. In each PCAOB report, it unravels the nature of audit deficiencies. The focus is on Big Four because they play a dominant role in the marketplace and issuers’ market capitalization. All the seven-year deficiencies are documented since publications of the reports from 2004 to 2012.

Findings

Of the 37 reports, 19 (51 per cent) were issued relating to audits conducted by the Big Four. Out of these 19 reports, 10 (53 per cent) contain inspection criticism. These include audit quality and common recurring audit deficiencies.

Research limitations/implications

This paper is based solely on those inspection reports published by the PCAOB.

Practical implications

The findings have significant implications to audit firms and the audit profession on improving audit quality, firms’ internal control and reports.

Originality/value

No known prior research paper is available on the ramifications of the PCAOB’s inspection reports relating to BRIC.

Citation

Huang, H. and Chong, H.G. (2016), "Audit and legal implications of PCAOB’s inspections among BRIC", International Journal of Law and Management, Vol. 58 No. 2, pp. 231-244. https://doi.org/10.1108/IJLMA-03-2015-0012