A survey of how audit partners view and respond to PCAOB inspections and internal quality reviews.

What is it about?

We ask audit partners their views about PCAOB inspections and internal quality reviews (IQRs) in terms of (1) predictability, (2) conduct, (3) reviewer qualifications and behavior, and (4) effects (i.e., on audits, partners, and firms). We find 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 follow 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.

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Why is it important?

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) that should be beneficial to accounting researchers, practicing auditors, and regulatory bodies interested in understanding the perceived effects and effectiveness of PCAOB inspections and IQRs.