Public audit oversight

One of the most significant changes in audit regulation has been the establishment of public audit oversight. In response to high-profile corporate financial reporting scandals, the U.S. set the tone in 2002 by creating the Public Company Accounting Oversight Board (PCAOB), marking the end of the long-standing model of self-regulation in the auditing profession. Following this, many other countries established public oversight bodies (POBs), albeit in diverse forms. The primary objective of POBs is to safeguard investors and serve the public interest through oversight of the audit profession, enforcement, and enhancing audit quality. Over the past two decades, a substantial amount of research has examined the effects of public oversight. Empirical archival studies predominantly find positive outcomes, including improvements in audit quality and real economic benefits. However, findings from behavioral accounting research and qualitative insights into the oversight process paint a much more complex picture, revealing strategic behavior by audit firms and a growing compliance-focused mindset. Additionally, broader concerns have emerged about the decreasing appeal of the auditing profession. Collectively, it appears that there are not only intended but also unintended consequences related to public oversight. Furthermore, despite its merits, corporate scandals continue to occur across the globe, deficiency rates remain high, and regulators continue to be under pressure. These challenges suggest that the optimal framework of public oversight has yet to be achieved.