Auditors are used to examining financial statements, but what happens when the auditors themselves are audited? That’s the focus of research by Dr. Amy Tegeler, assistant professor of accounting at the Lubar College of Business, along with her co-authors Dr. Veena Brown, associate professor at UWM, and Dr. Denise Downey. Their work, recently published in The Accounting Review, sheds light on how auditors perceive, react, and respond to regulatory inspections.
The Watchdogs of Auditing
Following the corporate scandals of the early 2000s, the Sarbanes-Oxley Act established the Public Company Accounting Oversight Board (PCAOB) to improve audit quality and protect investors. The PCAOB conducts annual inspections of large accounting firms, reviewing their audits of public companies. While these inspections are designed to enhance audit quality, they also create a unique challenge—how do experienced auditors handle receiving feedback from regulators?
Why This Matters
Most professionals receive feedback from a supervisor they know and trust. But PCAOB inspections are different. Auditors receive infrequent, unpredictable, and generally negative feedback from outside regulators they may not have a personal relationship with. Given auditors’ prominent levels of expertise, they may be skeptical of the feedback or see it as an obstacle rather than an opportunity for improvement.
Dr. Tegeler and her colleagues surveyed 120 experienced auditors from global public accounting firms, asking about their recent experiences. They explored auditors’ perceptions of PCAOB inspectors, the feedback itself, and the reactions and changes auditors made as a result.
What the Research Found
The study revealed wide-ranging perceptions, reactions, and responses to PCAOB inspections. Some auditors saw inspections as constructive and used feedback to improve future audits. Others, however, viewed the process as frustrating and engaged in impression management—making changes to audits that would help them pass future inspections rather than actually improving audit quality.
A key finding? The way auditors perceive the inspection process influences their response. If they view PCAOB inspectors and their message more positively (e.g. knowledgeable, open-minded, and well-reasoned), they are more likely to feel motivated to apply the feedback. Firms also play a critical role—when auditors feel supported by their firms, they are more likely to embrace feedback and make meaningful improvements.
Making Inspections More Effective
Despite the stress of the inspection process, auditors generally want to learn and improve. Regulators can leverage this motivation by focusing on clear, constructive feedback and ensuring the process feels fair and collaborative. For firms, fostering a culture that supports learning from inspections—rather than just passing them—can enhance both audit quality and job satisfaction.
At a time when financial oversight is more important than ever, research like this provides valuable insights into how regulation can drive better outcomes—not just for auditors, but for the entire financial system. This research is featured in The Accounting Review, “Auditor Perceptions, Reactions, and Responses to PCAOB Inspection Feedback,” Amy Tegeler, Veena Brown, and Denise Downey 2025.
| Research@Lubar Faculty scholarship in the Lubar College of Business spans the business fields and beyond through both theoretical and applied research that is published in leading journals. Here are some of our faculty’s most recent publications: |
| The Association Between PCAOB Revenue-Deficient Audit Engagements and Revenue Quality The Accounting Review Authors: Lawrence J. Abbott, Colleen M. Boland, Sean M. McCarthy, Laura A. Swenson |
| Litigation Risk and Information Effects on Private Sales of Securities Journal of Corporate Finance Authors: Onur Bayar, Ioannis V. Floros, Yini Liu and Juan Mao |
| Shareholder Activism Research: A System-Level View Academy of Management Annals Authors: Kevin Chuah, Mark DesJardine, Maria Goranova, Witold Henisz |
| When the Principal is the Firm’s Problem: Principal Costs and Their Corporate Governance Implications Academy of Management Review Edward Zajac, Maria Goranova |
| Click here to see more faculty research |