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| Author: | DeFond, M.L. Lennox, C.S. |
| Title: | The effect of SOX on small auditor exits and audit quality |
| Journal: | Journal of Accounting & Economics
2011 : JUN, VOL. 52:1, p. 21-40 |
| Index terms: | auditing auditors quality standards legislation markets USA |
| Language: | eng |
| Abstract: | We find that over 600 auditors with less than 100 SEC clients exit the market following SOX. Compared to the auditors who stay, the exiting auditors have lower quality, gauged by: (1) avoidance of AICPA peer reviews and failure to obey the PCAOB rules, and (2) peer review and inspection reports' severity. Additionally, clients of exiting auditors are provided with higher quality auditing from successor auditors, as captured by a greater probability of receiving going concern opinions. Our results indicate that the PCAOB inspections improve audit quality by giving low quality auditors incentives to exit the market. |
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