Accounting firms cautiously maneuver in the new audit environment – a note

Purpose - This paper seeks to discuss the effect that the Sarbanes‐Oxley Act (SOA) had on both the nature of the external audit function and overall audit quality. Additionally, it aims to discuss how audit firms maneuvered through the newly regulated environment, and what their strategic actions are for the future. Design/methodology/approach - This discussion is based on interviews conducted with auditors from nine public accounting firms located in Northeast Ohio, United States of America. The sample consisted of five national and four regional firms, and the interviewees included mostly partners and a few senior managers. Findings - The increased oversight and workload resulting from the SOA requirements has changed the nature of the external audit function to more compliance type work, and the environment has created much anxiety for the auditors. The new reform has significantly impacted the audit environment in terms of: scope of services; client assessment procedures; management and audit committee relationships with the external auditor; audit firm personnel management; and the long‐term outlook of the profession. The details of these impacts are discussed throughout the paper. Research limitations/implications - This paper provides detailed insight as to how the SOA impacted the audit profession. Hopefully, such an understanding will benefit future research in measuring the costs and benefits of the new reform. Lastly, a future research showed further examine the effect that the SOA has had on overall audit quality. Originality/value - This paper summarizes the insightful comments obtained in structured interviews with several leading audit professionals. The sample was judged to be highly knowledgeable of the changing audit environment caused by the SOA. With an improved understanding of its impacts, regulators, practitioners, and academics can better assess the effectiveness of the SOA.