Peer Review and Audit Quality: Should Peer Review of Governmental Audits and Employee Benefit Plan Audits Continue Under the Sarbanes-Oxley Act (SOX) of 2002?

• In Event: Audit Quality and Pricing

Abstract

The accounting profession has long touted peer review as a means to improve audit quality. About 23,600 CPA firms participate in the AICPA’s peer review program to show compliance with professional standards (AICPA, 2021). The Sarbanes-Oxley Act of 2002 had Public Company Oversight Board (PCAOB) inspections replace self-regulation of public company audits, but governmental and employee benefit plan audits remains under the AICPA purview.

This paper explores whether major peer reviews of governmental and employee benefit plan audits should continue self-regulation. A discussion on how to improve the current peer review process for such audits and thus enhance audit quality follows. Examination of the literature shows significant deficiencies in audits of governments and employee benefit plans. Adopting a PCAOB inspections approach may improve audit quality for these audits; however, the costs for auditees may be extensive. Several recommendations are put forward for the current self-regulated peer review process to improve the audit quality of governmental and employee benefit plan audits—lest they could lose their privilege of self-regulation.

Authors

• Alan Reinstein, Wayne State University

• Natalie T. Churyk, Northern Illinois University

• Cathleen L Miller, University of Michigan-Flint