Question

Discuss the Public Companies Accounting Oversight Board.

Answer 1

The United States Public Company Accounting Oversight Board (PCAOB) is a private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports. The Board is funded principally by fees from public companies. The costs of processing and reviewing public accounting firm registration applications is recovered from registration fees paid by those firms

In addition, the PCAOB establishes auditing and related professional practice standards for registered public accounting firms to help prepare and issue audit reports. The firms registered with the PCAOB range in size from sole proprietorships to large global organizations.

How the PCAOB was established

The PCAOB was established as part of the Sarbanes-Oxley Act, which required that U.S. public company audits be subject to external and independent oversight. Under Sarbanes-Oxley, accounting firms must register with the PCAOB in order to prepare, issue or participate in audit reports for issuers, brokers and dealers.

Non-U.S. accounting firms that furnish, prepare or play a substantial role in preparing audit reports for any U.S.-based issuer, broker and dealer are also subject to PCAOB rules.

The PCAOB has four primary responsibilities:

• registration of accounting firms (including non-US firms) that audit public companies (including non-US issuers) trading in US securities markets;
• inspections of registered public accounting firms;
• establishment of auditing and related attestation, quality control, ethics, and independence standards for registered public accounting firms; and
• investigation and discipline of registered public accounting firms and their associated persons for violations of specified laws or professional standards.