Public Company Accounting Oversight Board

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Public Company Accounting Oversight Board
Logo PCAOB 10 Years.jpg
Founded 2002
Headquarters Washington, DC
Key People James R. Doty, Chairman
Products Auditing oversight, research and enforcement
Website http://pcaobus.org/Pages/default.aspx

The Public Company Accounting Oversight Board (PCAOB) is a private sector, nonprofit corporation that was created by the Sarbanes-Oxley Act of 2002 to oversee the auditors of publicly-held companies. The organization's stated goal is to protect investors and further the public interest in the preparation of informative, fair and independent audit reports.[1]

History

Section 101 of the Sarbanes-Oxley Act of 2002 describes the establishment, duties, and powers of the Public Company Accounting Oversight Board. The Act requires that two of the five PCAOB board members be or have been certified public accountants. The Act also requires that all members of the board serve on a full-time basis.

Section 102 of Sarbanes-Oxley prohibits accounting firms that are not registered with the board from preparing or issuing audit reports on U.S. public companies and from participating in such audits.[2]

With the passage of the Dodd-Frank Act in 2010, the PCAOB assumed additional oversight of the audits of broker-dealers to include inspections, enforcement and standard setting authority.

As of August 2013, the PCAOB has issued numerous rulemakings, reports, and ten staff audit practice alerts.

Products and Services

Under Sarbanes-Oxley, any accounting firm, including those not based in the U.S., that prepares, issues, or participates in audit reports of issuers or broker-dealers must file an annual report with the PCAOB and pay an annual fee to the board. Under certain circumstances (a "Form 3 Event"), a special report must be filed. Such events include the withdrawal of an audit report, criminal or disciplinary actions against a firm, and material changes to a member firm's auditing or accounting business structure.[3]

The PCAOB creates industry standards and best-practices, conducts research and analysis of emerging audit issues, performs inspections on member firms, and initiates enforcement actions such as investigations, hearings, and sanctions.

Proposed New Auditing Standard, August 2013

On August 13, 2013, the PCAOB proposed a new auditing standard that would overhaul how company audits are reported to the public. The proposal would mark the first major change in 70 years to audit reporting of public companies.[4] Among the new standards:

  • A requirement that auditors identify "critical audit matters" such as matters encountered in an audit that were particularly complex, required subjectivity or lacked appropriate evidence;
  • A statement of auditor independence;
  • Audit firm tenure disclosure;
  • Changes to language regarding auditor's responsibilities for fraud.[5]

For more on the proposed rule visit the MarketsReformWiki entry.

Key People


References

  1. Our Mission. PCAOB.
  2. Registration. PCAOB.
  3. Rules on Periodic Reporting. PCAOB.
  4. U.S. Accounting Regulator Proposes More In-Depth Reports From Auditors. New York Times Dealbook.
  5. PCAOB proposes sweeping changes to the auditor’s reporting model. Journal of Accountancy.