Essays on the consequences of auditor regulatory oversight : evidence from PCAOB international inspections

  • Solomon Wise Dodzidenu ADZA

Student thesis: PhD Thesis (Lingnan)


The Public Company Accounting Oversight Board (PCAOB) was created in 2002 in response to widespread perceived audit failures with the mandate to oversee and inspect all auditors of SEC-registered firms. Though the PCAOB inspection is for the benefit of US-listed firms, it also has consequences for non-US-listed firms. Using a sample of firm-year observations from 35 countries that allow PCAOB international inspections, I examine the implications of the PCAOB international inspections for non-US auditors and non-US-listed firms. The dissertation consists of two chapters. The first chapter examines the effect of the PCAOB international inspections on industry specialization for inspected non-US auditors. I find that PCAOB inspected non-US auditors are more likely to reduce industry specialization after the public disclosure of inspection reports. The effect of reduced industry specialization is more pronounced for inspected non-US auditors who receive deficiency inspection reports, who are in industries with more SEC-registered clients, and who have a riskier portfolio of clients before the inspection. Also, the results show that local regulatory oversight does not affect the relationship between PCAOB international inspections and auditor industry specialization. The second chapter investigates the impact of PCAOB international inspections on debt choice for non-US-listed firms. I find that PCAOB international inspection is negatively associated with non-US-listed firms’ preference for bank debt. However, further analyses reveal that non-US-listed firms tend to rely on bank debt if their auditors receive deficiency inspection reports. These effects are larger for non-US-listed firms that are financially constrained. Also, the impact of PCAOB international inspections on bank debt is greater for non-US-listed firms operating in countries with common law, low corruption, high regulatory quality, and strong rule of law. Overall, the study suggests that PCAOB international inspections reduce industry specialization for non- US auditors and improve debt contracting for non-US-listed firms.
Date of Award15 Aug 2022
Original languageEnglish
Awarding Institution
  • Lingnan University
SupervisorYue ZHANG (Supervisor) & Zhenpin Kenny LIN (Co-supervisor)

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