Chad Stefaniak: “Audit Partner Perceptions of Post-Audit Review Mechanisms: An Examination of Internal Quality Review and PCAOB Inspections,” published in Accounting Horizons

by Spears School News Staff 
(July 6, 2012 at 1:08 pm)
Chad Stefaniak

Chad Stefaniak

This study reports the results of a survey of 107 audit partners from large public accounting firms that investigates and compares partner perceptions of Public Company Accounting Oversight Board [PCAOB] inspections’ and Internal Quality Reviews’ [IQRs]: (1) predictability, (2) conduct, (3) reviewer qualifications and behavior, and (4) effects (i.e., on audits, partners, and firms).

A majority of partners can or try to predict the year of both reviews and perceive that, relative to PCAOB inspections, IQR reviewers have a better understanding of firms’ audit methodologies, IQRs focus more on whether firms follows their methodology, and IQRs examine more audit areas. In addition, partners believe that PCAOB inspectors are more focused on finding deficiencies than are IQR reviewers, and that IQR feedback is more timely and helpful for improving audit quality. Both reviews are perceived to impact professional reputation; however, partners perceive that PCAOB inspections increase their firms’ litigation risk more so than do IQRs.

Finally, less experienced partners perceive reviews as more invasive and as posing more consequences than do more experienced partners. We provide credible, informed perceptions of partners directly involved in both PCAOB inspections and IQRs (which heretofore have not been examined directly by practitioner or academic research), which should be beneficial to accounting researchers, practicing auditors, and regulatory bodies interested in understanding the perceived effects and effectiveness of PCAOB inspections and IQRs.