TY - JOUR
T1 - The credibility of self-regulation
T2 - evidence from the accounting profession's peer review program
AU - Hilary, Gilles
AU - Lennox, Clive
PY - 2005/12/1
Y1 - 2005/12/1
N2 - Following the Sarbanes–Oxley Act, self-regulated peer reviews at accounting firms were replaced by independent inspections conducted by the Public Company Accounting and Oversight Board. Critics of self-regulation had argued that the peer review program lacked credibility. This paper tests whether the opinions issued by the peer reviewers provided credible information to clients about audit firm quality. We find audit firms gained clients after receiving clean opinions from their reviewers and lost clients after receiving modified or adverse opinions. This suggests peer review opinions provided credible information about quality differences between audit firms.
AB - Following the Sarbanes–Oxley Act, self-regulated peer reviews at accounting firms were replaced by independent inspections conducted by the Public Company Accounting and Oversight Board. Critics of self-regulation had argued that the peer review program lacked credibility. This paper tests whether the opinions issued by the peer reviewers provided credible information to clients about audit firm quality. We find audit firms gained clients after receiving clean opinions from their reviewers and lost clients after receiving modified or adverse opinions. This suggests peer review opinions provided credible information about quality differences between audit firms.
UR - http://dx.doi.org/10.1016/j.jacceco.2005.03.002
U2 - 10.1016/j.jacceco.2005.03.002
DO - 10.1016/j.jacceco.2005.03.002
M3 - Article
SN - 0165-4101
VL - 40
SP - 211
EP - 229
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1-3
ER -