Publication Type
Journal Article
Version
submittedVersion
Publication Date
1-2023
Abstract
I examine the economic consequences on corporate innovation when PCAOB inspections cite auditors for insufficient procedures in auditing the valuation of intangibles. I find that the clients of deficient auditors recognize larger and timelier impairments of intangibles, suggesting that affected auditors increase scrutiny about the valuation of intangibles in subsequent audits. This effect obtains only for valuation-related deficiencies and is salient for the clients of auditors who receive such deficiencies repeatedly. I also document real effects that the clients of deficient auditors exhibit less use of external mergers and acquisitions—which yield recognizable intangibles whose valuation is subject to increased auditor scrutiny. Overall, these results suggest that the intervention by the PCAOB effectively alters the measurement of intangibles and perhaps unintentionally affects how clients invest in corporate innovation.
Keywords
PCAOB, Innovation, Intangibles, Impairments, M&A, R&D
Discipline
Accounting | Corporate Finance | Technology and Innovation
Research Areas
Corporate Reporting and Disclosure
Publication
Review of Accounting Studies
ISSN
1380-6653
Identifier
10.1007/s11142-022-09750-9
Publisher
Springer
Citation
KIM, Jungbae.
The effect of PCAOB inspections on corporate innovation: Evidence from deficiencies about the valuation of intangibles. (2023). Review of Accounting Studies.
Available at: https://ink.library.smu.edu.sg/soa_research/1997
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1007/s11142-022-09750-9