Does “Catching Up” on Technology Affect the Effectiveness of Increased Regulation? Evidence from PCAOB Inspection Reports

SUMMARY In this paper, we examine the challenges in auditing information technology (IT)-enabled financial reporting by analyzing PCAOB inspection reports for the years 2019–2024. Despite increased regulatory efforts to enhance audit quality, recent PCAOB inspection findings still reveal recurring deficiencies in public company audits, suggesting diminished audit quality. Our review of PCAOB inspection reports indicates that audit deficiencies related to IT and accounting information systems, such as deficiencies in testing automated controls and using system-generated data as audit evidence, persist and remain challenging to address. These findings are critical as more companies adopt advanced technologies in their financial reporting processes. This paper provides valuable insights into how evolving IT may heighten the complexity of audit engagements and proposes recommendations to enhance audit quality in this rapidly evolving IT environment. Data Availability: All data used in this paper are publicly available. JEL Classifications: G38; M42; M48.