RT Article
T1 Consequences of ethical and audit violations: evidence from the PCAOB Settled Disciplinary Orders
JF Journal of business ethics
VO 179
IS 1
SP 179
OP 203
A1 Dharmasiri, Prabashi
A1 Phang, Soon-Yeow
A1 Prasad, Ashna
A1 Webster, John B. 1955-2016
LA English
PB Springer Science + Business Media B. V
YR 2022
UL https://www.ixtheo.de/Record/1811497772
AB We investigate the justifications provided by the Public Company Accounting Oversight Board (PCAOB) when sanctioning audit firms and individual auditors, as disclosed in the publicly released Settled Disciplinary Orders (SDOs). Employing responsive regulation theory, we seek to gain an understanding of violating behaviors by audit firms and individual auditors that attract regulatory responses ranging in nature from persuasive to punitive sanctions. Using 298 SDOs issued by the PCAOB from 2005 to 2020, we find that the frequency and severity of PCAOB sanctions at the firm level are positively associated with auditing standards violations, independence issues, and reckless behavior. At the individual auditor level, integrity violations and reckless behavior are positively associated with the frequency and severity of PCAOB sanctions. Our findings indicate that significantly higher financial penalties for individual auditors (audit firms) arise from manipulation of audit evidence (quality control criticisms). Further, the PCAOB financially penalizes Big 4-affiliated auditors and firms significantly more than their non-Big 4 counterparts. Other factors such as multiple individuals being implicated in an SDO and whether a firm and individual(s) are both implicated in the SDO are important considerations in sanction(s) imposed by the PCAOB. Overall, our findings suggest that the PCAOB adopts a responsive enforcement strategy when monitoring the auditors in their ethical and audit compliance efforts.
K1 Audit Quality
K1 Ethical violations
K1 PCAOB Disciplinary Orders
K1 Responsive regulation theory
K1 Aufsatz in Zeitschrift
DO 10.1007/s10551-021-04786-4