The Revolving Door between the PCAOB and Large Audit Firms

In a recent study, we examine the flow of workers between the Public Company Accounting Oversight Board (PCAOB) and large U.S. audit firms. The PCAOB, created by the Sarbanes-Oxley Act of 2002, oversees the audits of public companies by, among other things, performing external inspections of firms that audit those companies. Recent studies have found that these inspections deliver important signals to the market for audit services.  In particular, the number of deficiencies identified in the firm’s PCAOB inspection report can harm an audit firm’s ability to retain and attract new clients (Nagy, 2014; Aobdia and Shroff, 2017).

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