Accountants' Handbook Volume One: Financial Accounting and General Topics, Eleventh Edition

Chapter 5. PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

Don Pallais, CPA

BACKGROUND

Congress created the Public Company Accounting Oversight Board (PCAOB) as a response to the Enron, WorldCom, and other accounting-related scandals. The Sarbanes-Oxley Act of 2002 created new requirements for publicly held companies and others (Chapter 4 discusses that Act in more detail) and revamped the regulatory system for auditors of public companies. The authority for standard-setting for audits of financial statements of publicly held companies and for quality control for firms that perform those audits was taken from the American Institute of Certified Public Accountants (AICPA), where it had been since the 1930s, and bestowed on the PCAOB.

The PCAOB opened its doors in January 2003 and held its first meeting that month. The Securities and Exchange Commission (SEC) reported, on April 25, 2003, that the PCAOB was organized and had the capacity to carry out its legislated duties, the final critical step in its establishment.

PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD AUTHORITY

Sarbanes-Oxley defines the PCAOB's authority and revises the Securities Act of 1934 to recognize it. PCAOB was established to:

oversee the audit of public companies that are subject to the securities laws, and related matters, in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports for companies the securities of which are sold to, ...