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How are politicians influencing independent regulators?

Hyun Jong Park and his coauthor measured the harshness of inspection reports issued to audit firms by the Public Company Accounting Oversight Board (PCAOB) to explore the influence of political pressure on independent regulatory bodies.

The researchers discovered that the PCAOB issued comparatively less harsh reports to audit firms that were making contributions to politicians. Park believes the PCAOB is facing indirect pressure from politicians through its oversight authority, the Securities and Exchange Commission, to lessen the harshness of reports issued to these audit firms.

Park warns that indirect political pressure exerted upon independent regulatory bodies compromises their intended function and runs the risk of negatively affecting the overall market.