Business, Management and Accounting
4 years ago

Audit Watchdog Weeds Out Subpar Auditors, Boosts Investor Confidence

2 views
SSRN Electronic Journal
The Effect of SOX on Small Auditor Exits and Audit Quality
Clive S. Lennox, Mark L. DeFond

Paper Summary

After the implementation of SOX, over 600 auditors left the market. These auditors were of lower quality compared to those who stayed, leading to clients getting better auditing from new auditors. The quality was measured by things like avoiding official reviews and following rules. The audit quality got better because low-quality auditors were motivated to leave by stricter inspections.

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