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1 – 10 of over 26000This 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…
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.
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Susannah Baines and Chris Hatton
People with learning disabilities are at risk of poor health and premature death. Due to these inequalities, NHS trusts are required to make reasonable adjustments to their care…
Abstract
Purpose
People with learning disabilities are at risk of poor health and premature death. Due to these inequalities, NHS trusts are required to make reasonable adjustments to their care, such as longer appointment times, with the legal duty on them being “anticipatory”. The paper aims to discuss these issues.
Design/methodology/approach
Secondary analysis of CQC acute hospital inspection reports asking the following research questions: Do CQC inspection reports mention people with learning disabilities? Where issues concerning people with learning disabilities are reported in CQC hospital inspection reports, what issues and reasonable adjustments are reported? Are there any relationships between comments made in the inspection reports and CQC ratings of the trusts?
Findings
In total, 29 of the 30 trust-wide inspection reports (97 per cent) and 58 of the 61 specific site reports (95 per cent) included at least one mention of people with learning disability/ies. Most comments about practices for people with learning disabilities were positive across all CQC inspection output types and across all CQC overall ratings, although the proportion of positive comments decreased and the proportion of negative comments increased as CQC ratings became less positive.
Research limitations/implications
Overall the authors found that CQC inspection reports routinely contained some information regarding how well the hospitals were working for people with learning disabilities. The depth of information in reports varied across trusts, with the potential for CQC reports to more consistently report information collected during inspections.
Originality/value
The report updates and extends a report published by the Public Health England Learning Disabilities Observatory in 2015.
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John L. Abernathy, Michael Barnes and Chad Stefaniak
For the past 10 years, the Public Company Accounting Oversight Board (PCAOB) has operated as an independent overseer of public company audits. Over 70 percent of PCAOB studies…
Abstract
For the past 10 years, the Public Company Accounting Oversight Board (PCAOB) has operated as an independent overseer of public company audits. Over 70 percent of PCAOB studies have been published since 2010, evidencing the increasing relevance of PCAOB-related research in recent years. Our paper reviews the existing literature on the PCAOB’s four primary functions – registration, standard-setting, inspections, and enforcement. In particular, we examine PCAOB registration trends and evaluate the effects of PCAOB registration requirements on the issuer audit market, as well as discuss the relative costs and benefits (e.g., auditor behavior changes, improvements in audit quality, auditor perceptions) of the 16 auditing standards the PCAOB passed in its first 10 years of operation. Further, we summarize the literature’s findings on the effects of the PCAOB inspection process on various facets of audit quality. Finally, we analyze the research concerning the PCAOB’s enforcement actions to determine how markets have responded to sanctions against auditors and audit firms. We contend that understanding and reviewing the effects of the PCAOB’s activities are important to future audit research because of the PCAOB’s authority over and oversight of the issuer audit profession. We also identify PCAOB-related research areas that have not been fully explored and propose several research questions intended to address these research areas.
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The purpose of this paper is to examine the effect of the PCAOB part II report disclosures on US triennially inspected audit firms’ deregistration decisions, the likelihood and…
Abstract
Purpose
The purpose of this paper is to examine the effect of the PCAOB part II report disclosures on US triennially inspected audit firms’ deregistration decisions, the likelihood and the timing of audit firms’ dismissals and resignations.
Design/methodology/approach
The paper anchored on US regulations used 158 publicly available records of disclosed PCAOB part II reports from 2004 to 2012.
Findings
The number of the quality control deficiencies disclosed in the part II report affects US triennially inspected audit firms’ decisions to deregister from the PCAOB. Additionally, audit firms’ dismissals and resignations, both occur mostly within the first year after the part II report disclosure, although audit firms that subsequently deregister are more likely to be dismissed.
Practical implications
The paper provides support that the disclosure of the PCAOB part II inspection report motivates audit quality improvement.
Social implications
The PCAOB inspection and subsequent disclosure of the part II inspection report enhances audit quality, which in turn, enhances investor confidence in the accuracy and reliability of audited financial statements.
Originality/value
The paper provides insights about the effect of the disclosures of PCAOB part II report, over and above any benefits from the PCAOB part I report disclosures, which is the dominant focus of related literature.
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This study reviews the existing literature on the U.S. peer review system and the Public Company Accounting Oversight Board (PCAOB) inspection system to assess our knowledge of…
Abstract
This study reviews the existing literature on the U.S. peer review system and the Public Company Accounting Oversight Board (PCAOB) inspection system to assess our knowledge of audit regulation. The traditional self-regulatory system of the accounting profession came to an end, in 2002, when the PCAOB was established to oversee the audit firms of publicly traded companies. This paper contributes to the controversial debate about self-regulation versus independent regulation by analyzing, categorizing, and comparing the research findings on the peer review system and the PCAOB system along three dimensions: the validity of peer reviews and PCAOB inspections, the recognition of reviews and inspections by decision-makers (e.g., investors, bankers, committees), and the effect of reviews and inspections on audit quality. Synthesizing the research on the regulatory regimes suggests that the notion of external quality control, both through peer reviews and government inspections, is positively linked with an improvement of audit quality. At the same time, the analysis indicates that external users do not seem to recognise peer review and PCAOB reports as very useful instruments for decision-making, which is in line with an identified rather skeptical perception of the audit profession on reviews and inspections. Overall, this study reveals that although the academic literature on peer review and PCAOB inspection is extensive it has not produced definitive conclusions concerning various aspects of audit regulation. This paper shows how this blurred picture is due to conflicting research findings, the dominance of the quantitative research paradigm, and unchallenged assumptions within the literature, and concludes by proposing research opportunities for the future.
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William Buslepp, R. Jared DeLisle and Lisa Victoravich
Part II of the Public Company Accounting Oversight Board (PCAOB) inspection report is released only when firms fail to remediate quality control criticisms and is intended to be a…
Abstract
Purpose
Part II of the Public Company Accounting Oversight Board (PCAOB) inspection report is released only when firms fail to remediate quality control criticisms and is intended to be a public signal of audit quality. The purpose of this paper is to reexamine whether audit clients react to the release of Part II of the PCAOB inspection report as a signal of audit quality.
Design/methodology/approach
This study uses a difference-in-difference regression model to examine the association between the release of Part II of the PCAOB inspection report and an audit firm’s change in market share. A sensitivity analysis is also performed to determine whether the main findings are robust to the timing of the release of the report and type of quality control criticism included in Part II of the inspection report.
Findings
After controlling for the prior year’s changes in market share, the authors find no evidence that clients react to the public release of Part II of the report. In the second part of the study, they examine when clients become aware of the contents of the Part II report prior to its release. Firms with audit performance criticisms experience a decrease in market share following the release of Part I. Firms with firm management criticisms experience a significant decrease in market share following the remediation period and before the public release of Part II.
Practical implications
The results suggest that Part II of the PCAOB inspection report does not provide new information to the market. Clients appear to be aware of the information contained in Part II of the PCAOB inspection report prior to its release. The authors believe that the delay in releasing the Part II report may create an information imbalance, and the PCAOB may want to consider ways to improve the timeliness of the information.
Originality/value
This study questions the generalizability of prior research which finds that Part II of the inspection report provides new information that is valued by the public company audit market as a signal of audit quality. The findings provide new evidence that the contents of Part II and the firm’s ability to remediate the quality control concerns are known to audit clients prior to the public release.
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The purpose of this case study was to obtain information on the hygiene standards of food premises using the Freedom of Information (FOI) Act 2000.
Abstract
Purpose
The purpose of this case study was to obtain information on the hygiene standards of food premises using the Freedom of Information (FOI) Act 2000.
Design/methodology/approach
Eight local authorities in South Wales were asked to provide the most recent food hygiene inspection of a named food premise in their area. The disclosed reports were assessed to determine whether they conformed to the Food Standards Agency (FSA) Food Law Code of Practice and how useful they would be to the consumer seeking information on the hygiene standards of a food premise.
Findings
Five of the eight authorities provided full information. Most authorities supplied a risk grading for the premises. Reports ranged from completed comprehensive inspection protocols with full post‐inspection letters to a hand written, barely legible report that failed to adequately differentiate between legal requirements and recommendations. Without some training in food law and food hygiene it would be difficult for most consumers to interpret some of the reports.
Research implications/limitations
The results of this case study have increased confidence that local authorities are now complying with the FOI Act. It raises concerns about the consistency, fairness and robustness of inspections.
Practical implications
If there is to be greater transparency about hygiene standards in food premises, regulators will have to take account of the public in their communications. The public will need to be educated about the inspection and enforcement process and any systems used to disclose inspection results.
Originality/value
The paper shows how FOI can be used to inform the public about food hygiene standards.
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Elizabeth Johnson, Kenneth J. Reichelt and Jared S. Soileau
We investigate the effect of the PCAOB’s Part II report on annually inspected firms’ audit fees and audit quality. The PCAOB replaced the peer review auditor program with an…
Abstract
We investigate the effect of the PCAOB’s Part II report on annually inspected firms’ audit fees and audit quality. The PCAOB replaced the peer review auditor program with an independent inspection of audit firms. Upon completion of each inspection, the PCAOB issued inspection reports that include a public portion (Part I) of identified audit deficiencies, and (in most cases) a nonpublic portion (Part II) of identified quality control weaknesses. The Part II report is only made public when the PCAOB deems that remediation was insuffcient after at least 12 months have passed. Starting around the time of the 2007 Deloitte censure (Boone et al., 2015), the PCAOB shifted from a soft synergistic approach to an antagonistic approach, such that Part II reports were imminent, despite delays that ultimately led to their release one to four years later than expected. Our study spans the period from 2007 to 2015, and examines the effect on audit fees and audit quality at the earliest date that the Part II report could have been released – 12 months after the Part I report was issued. We find that following the 12 month period, that annually inspected audit firms eventually lost reputation by lower audit fees, while they concurrently made remedial efforts to increase the quality of their client’s financial reporting quality (abnormal accruals magnitude and restatements). However, three years after the Part II report was actually released, audit fees increased.
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The purpose of this paper is to provide summaries of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in October…
Abstract
Purpose
The purpose of this paper is to provide summaries of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in October, November, and December 2011.
Design/methodology/approach
The paper provides Regulatory Notice 11‐49, October 2011, Advertising Regulation; Regulatory Notice 11‐52, November 2011, Senior Designations; Regulatory Notice 11‐54, November 2011, Branch Office Inspections; and the description of one disciplinary action in which a firm was sanctioned and an individual fined.
Findings
Notice 11‐49: to inform firms of recent developments regarding the application of rules governing communications with the public, FINRA is proving guidance to firms on communication with the public regarding exchange‐traded products, treasury inflation‐protected securities (TIPS), use of “FINRA” in firm trademarks, and identification of related prior filings when submitting new filings for review. Notice 11‐52: FINRA reminds firms of their supervisory obligations regarding the use of certifications and designations that imply expertise, certification, training or specialty in advising senior investors. Notice 11‐54: FINRA and the Securities and Exchange Commission's Office of Compliance Inspections and Examinations provide broker‐dealer firms with information on developing effective policies and procedures for branch office inspections and remind firms of supervisory requirements under FINRA's supervision rule and notes common deficiencies and strong compliance practices. Trade Reporting Notice on TRACE Reporting Issues: FINRA answers selected member firm detailed questions on reporting issues related to The Trade Reporting and Compliance Engine (TRACE), the vehicle developed by FINRA to facilitate the mandatory reporting of over the counter secondary market transactions in eligible fixed income securities. All broker/dealers who are FINRA member firms have an obligation to report transactions in corporate bonds to TRACE under an SEC approved set of rules.
Originality/value
These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends.
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The purpose of this paper is to document the types of and any changes in the budgeting and performance management practices of New Zealand primary educational organisations and…
Abstract
Purpose
The purpose of this paper is to document the types of and any changes in the budgeting and performance management practices of New Zealand primary educational organisations and explain why they occurred using an institutional theory framework. In doing so, it will provide an understanding of past budgeting and performance measurement and reporting practice, as well as consider the policy implications for the contemporary public‐provided primary education system.
Design/methodology/approach
The paper uses a historical archival‐based case study approach.
Findings
The historical evidence suggests that from 1844 until 1859 budgeting and performance management practices in educational organisations changed as the provision and control of education moved from not‐for‐profit community‐based organisations to become a predominantly public function. The budgeting, inspection and performance management practices and changes observed in the primary education providers were directly related to their need to obtain legitimacy and procure resources.
Practical implications
The detailed information regarding historical budgeting and performance management practices provides rich background material for researchers as well as suggesting that split responsibility and control between the community and government for education creates a tension between the two controlling bodies.
Originality/value
This paper is the first study of internal accounting and performance reporting practices in a mid‐nineteenth century New Zealand education context.
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