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This paper evaluates the effectiveness of Canadian Public Accountability Board (CPAB), the independent Canadian audit regulator charged with improving audit quality in Canada. I exploit a unique setting where a subset of Canadian audit engagements is subject to joint inspection by CPAB and the U.S. Public Company Accounting Oversight Board (PCAOB), and develop ex ante expectations for CPAB¡¯s inspection outcomes based on regulatory capture theory (Dal B¨®, 2006; Stigler, 1971). Using hand collected data from CPAB and PCAOB, I find that CPAB reports significantly lower deficiency rate and fewer areas of deficiency than PCAOB for Canadian Big 4 accounting firms but reports similar deficiency rates indistinguishable from PCAOB¡¯s for non-Big firms. I further find that CPAB¡¯s inspection reports disclose less information than PCAOB¡¯s. This study provides new evidence on behaviour of a non-US audit regulator and has implications for auditing researchers and practitioners.

zcarol2@ceibs.edu