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Study supports PCAOB oversight in boosting investor confidence

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Aug 25, 2017

On August 25, 2017, Accounting Today published an article on an academic study published in May 2017 that lends support to the Public Company Accounting Oversight Board’s (PCAOB) regulatory oversight of auditing firms, suggesting it gives investors greater confidence in companies, in turn leading to more capital available to businesses.

The study, by Professor Nemit Shroff of the Massachusetts Institute of Technology’s Sloan School of Management, found that companies issue additional capital amounting to 0.5 percent of assets and increase investment expenditures by 0.3 percent of assets as a result of additional auditor regulatory oversight.

In the study, he used data from the PCAOB international inspection program to test whether auditor regulatory oversight affects companies’ financing and investing behavior. Shroff examined a sample of non-U.S. companies that were audited by a PCAOB-inspected auditor. Using data from 35 countries from 2002 through 2014, he found that companies whose auditors are inspected by the PCAOB raised significantly more debt and equity capital after the publication of their audit firm’s PCAOB inspection report.

Review the article on Accounting Today's website.

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