The Impact of PCAOB Auditing Standard No. 5 on Audit Fees and Audit Quality

Posted: 18 Jul 2009 Last revised: 1 Mar 2017

See all articles by Dechun Wang

Dechun Wang

Texas A&M University

Jian Zhou

University of Hawaii at Manoa

Date Written: March 22, 2012

Abstract

We investigate the impact of PCAOB Auditing Standard No. 5 (AS5) on audit fees and audit quality. AS5 supersedes Auditing Standard No. 2 (AS2) and became effective for audits for accelerated filers for fiscal years ending on or after November 15, 2007. Using a large sample of accelerated filers subject to AS5, we find evidence that audit fees decrease upon the adoption of AS5. More importantly, even though AS5 adoption reduces audit fees for our test sample, we find no evidence of a decrease in audit quality. In summary, we document evidence that AS5 improves the efficiency of internal control audits.

Keywords: PCAOB Auditing Standard No. 5, audit fee, audit quality, internal control

JEL Classification: M41, M44, M49, L84

Suggested Citation

Wang, Dechun and Zhou, Jian, The Impact of PCAOB Auditing Standard No. 5 on Audit Fees and Audit Quality (March 22, 2012). 2012. Accounting Horizons 26 (3): 493-511., Available at SSRN: https://ssrn.com/abstract=1434141

Dechun Wang (Contact Author)

Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4353
United States

Jian Zhou

University of Hawaii at Manoa ( email )

Honolulu, HI 96822
United States

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