What question sparked your curiosity?

Public Oversight Boards (POBs) are independent watchdogs that monitor auditors and enforce standards to improve audit quality and prevent failures. Over the past 25 years, many countries introduced such POBs. We explored two key questions: 1) what drives the timing and design choices—inspection practices, reporting and enforcement powers—of POB establishment, and 2) whether the POB establishment and design choices affected audit quality.

What did you discover?

We found that by 2020, most countries in our sample had adopted public oversight boards, and adoption was faster in civil law countries with strong institutions, and when large media scrutiny of auditors was present. POB design choices vary widely across countries and seem to be independent choices. We further find that the establishment of POBs enhanced audit quality. We also find some evidence that the audit quality effect is driven by certain design choices, including the disclosure of inspection findings, enforcement and type of oversight.

Why do these findings matter?

Our study offers the first global look at how public oversight boards are designed and how they impact audit quality, providing fresh insights for regulators and the auditing profession.

Literature:

Carson, E., Lamoreaux, P., Simnett, R., Thuerheimer, U. & Vanstraelen, A. (Online Early). Establishment of National Public Audit Oversight Boards: Descriptive Evidence and Implications for Audit Quality. Journal of Accounting Research (open access)