The purpose of the study is to investigate the extent to which the transition from self-regulation to heteronomy has reduced the gap in audit quality between Big Four and non-Big Four auditors. We address whether the Public Company Accounting Oversight Board (hereafter, PCAOB) has reduced the gap in audit quality between Big Four and non-Big Four auditors. Specifically, we shed light on the audit quality in reducing accruals management. Although auditor reporting decisions, ex ante cost-of-equity capital, and analyst forecast accuracy are arguably cleaner measures of audit quality than are discretionary accruals, we consider discretionary accruals an appropriate measure because they are most relevant to PCAOB inspections. This work fills a gap in the current literature on audit quality. The quality of the work of external auditors was criticized sharply after Enron bankruptcy in 2001 and the collapse of Arthur Andersen in 2002. This criticism motivated regulatory changes in the United States, and led to the implementation of Sarbanes–Oxley Act of 2002 (hereafter, SOX) (Francis, 2004). The main provisions of this Act regarding auditors include the prohibition of certain consulting engagements for audit clients, and the establishment of a PCAOB. PCAOB performs inspections annually for firms that audit at least 100 public companies, and triennially for those auditing one hundred or fewer public companies. In March, 2008, the Center for Audit Quality (CAQ) conducted a survey of the audit committee members1 . The results of this survey showed that eighty two percent of the subjects felt that audit quality had been improved in recent years, and fifty eight percent felt that SOX had had a positive influence on audit quality. Using different proxies for audit quality, the academic literature has also made great efforts to determine whether or not SOX has had any positive effects. To the best of our knowledge, however, little of prior studies has investigated whether SOX has different effects on the audit quality of Big Four and non-Big Four auditors, and it is this gap in the literature that the current work seeks to address.  Our study is potentially relevant to recent calls for research on whether changes to the institutions responsible for monitoring audit firms have proven beneficial (DeFond and Francis, 2005; Nelson, 2006). Many academic studies have found that larger accounting firms provide higher quality audits2 . The primary argument made by these studies to explain these results is based on the idea that big audit firms have more valuable reputations that they need to protect, are more independent, and have access to more skills capacity and technical expertise.