Abstract
Despite the importance of registration with the PCAOB, there is surprisingly little academic research on the registration process and its impact on audit outcomes (Abernathy, Barnes and Stefaniak 2013). The PCAOB allows registration of audit firms from non-US countries. However, China and a few other countries do not allow the PCAOB to conduct inspections of audit firms. We take advantage of this natural setting to investigate whether PCAOB-registered audit firms improve audit quality in the absence of inspections. We also examine whether PCAOB-registered audit firms charge an audit fee premium. We find that both audit quality and audit fees increase following PCAOB registration. Overall, our findings suggest that PCAOB registration has a positive impact on the quality of audits in China and that clients are willing to pay higher audit fees for audits by PCAOB-registered firms