Public Company Accounting Oversight Board - Explained
What is the PCOAB?
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Table of ContentsWhat is the Public Company Accounting Oversight Board?What Does the Public Company Accounting Oversight Board Do? Academic Research on the Public Company Accounting Oversight Board (PCAOB)
What is the Public Company Accounting Oversight Board?
The Public Company Accounting Oversight Board (PCAOB), is an auditing board that oversees the audits of public companies, broker-dealers and other companies. This is a private but non-profit establishment that periodically regulates audit experts of public traded companies. PCAOB protects the rights of investors by minimizing audit risks during auditing of companies and other corporate entities.
What Does the Public Company Accounting Oversight Board Do?
PCAOB is an independent organization which is not regulated by the government. This board controls and monitors auditors of publicly traded companies with the aim of reducing audit risk which will in turn offer investment security to the investors. In the 1990s, many auditing and accounting scandals were recorded and this brought about the passage of PCAOB as an approach to minimize the risks attributed to auditing. The Public Company Accounting Oversight Board was created by the Sarbanes-Oxley Act of 2002 with the aim of protecting investors and regulating auditors of publicly traded companies. PCAOB sees to it that auditors adhere to a set of guidelines vital for the task. Only brokers, dealers and public company auditors that are registered with PCAOB are regulated or inspected by the Board. Sanctions can also be meted to erring auditors, in 2016, the board settled about 54 disciplinary orders and imposed a fine $8 million. As included in the Sarbanes-Oxley Act of 2002, professionals that audit U.S companies are regulated by PCAOB and sanctions are meted out accordingly. The board members of PCAOB are independently appointed by the U.S. Securities and Exchange Commission (SEC), the members are entitled to a five-year tenure. SEC is an agency of the United States which has the responsibility of supervising exchange industries, even audit firms. The board members of PCAOB are five in number and two of them must be Certified Public Accountants. The major responsibilities of PCAOB include registration of public accounting firm, inspecting and investigating the firms, meting out discipline on erring firms and establishing quality control auditing. Presently, PCAOB has four board members because one of the seats is vacant. The members execute their duties with a staff of over 800 people from major departments. The mission of PCAOB is to oversee public accounting firm or audits of companies with the aim of protecting investors. Public companies and SEC-registered dealers and brokers are regulated by PCAOB through constant monitoring, provision of auditing quality control and ethics that will protect public interest. PCAOB releases regular audit reports that are accurate and informative. PCAOBs vision is to be a mother to public accounting firms, this will present PCAOB as a reliable organization that sets auditing standards for auditors of publicly traded companies. The vision is to improve the quality of auditing, enhance integrity and professionalism of auditors and provide security for investors through effectiveness and accountability of auditors. There are some core values that PCAOB hold at high esteem. There are five core values of PCAOB, these core values are; integrity, excellence, accountability. Collaboration and effectiveness. Adherence to ethical and professional conduct is vital to PCAOB, her professionals also strive for excellence both in internal and external dealings. Furthermore, PCAOB manages resources efficiently and effective and also ensure the effectiveness of policies that are implemented. Diverse skill sets and perspectives are also enhance by PCAOB, with collaboration, the effectiveness of policies and practices is achieved. In additions, PCAOB ensures that auditors of public accounting firms are accountable and this gives excellent output. There are certain responsibilities that are expected of PCAOB, these responsibilities are listed below;
- Registration of auditors of public firms, public accounting firms and SEC-registered brokers or dealers.
- Ensuring that registered public accounting firms, SEC-registered brokers and dealers comply to the 2002 Sarbanes-Oxley Act.
- Establishing modes or standards of operation for the registered firms such as quality control auditing and their ethics.
- Monitoring and regulating the registered firms through regular inspections and investigations.
- Imposing penalties on erring members.