- Author : Michael Ettredge
- Publisher :
- Release : 2020
- ISBN :
- Pages : pages
The Effect of PCAOB Disclosure Regulations on the Structure of the Small Public Company Audit Market
Download or read book The Effect of PCAOB Disclosure Regulations on the Structure of the Small Public Company Audit Market written by Michael Ettredge and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Three recent PCAOB releases increase PCAOB registrant's disclosure requirements. Form 2 (2009) requires audit firms to file an annual report to facilitate analysis and inspection by the PCAOB; Form 3 (2009) requires timely reporting of disciplinary, administrative and other proceedings related to a registrant's audit practice; and Form AP (2017) requires disclosure of the identity of the engagement partner and of other firms playing a significant role in an audit. The Forms include previously undisclosed information, aggregations of disclosures provided elsewhere, and information potentially detrimental to firm reputation, thereby imposing direct and indirect costs on PCAOB registrants. We examine the effects of these disclosure requirements on the pool of firms available to audit SEC Smaller Financial Reporting companies, a market segment important to the U.S. capital markets, and a pool that often is audited by small and medium-sized accounting firms. We document that initiations of both Form 2/3 and of Form AP reporting are accompanied by significant shrinkage in the pool of smaller PCAOB registered audit firms. Using hand-gathered data we further investigate the following issues. What effect do the new required disclosures appear to have had on concentration in the small audit firm market? What do the characteristics and subsequent histories of the de-registering audit firms suggest about their motives for de-registration and their strategies? How has audit quality changed?