A private, non-profit organization established by the United States Congress to oversee the audits of public companies, brokers, and dealers, protecting investors and furthering the public interest in preparing informative, accurate, and independent audit reports. Key points about the PCAOB:
- Establishment: The PCAOB was created under the Sarbanes-Oxley Act of 2002, which was enacted in response to major corporate accounting scandals, such as Enron and WorldCom.
- Responsibilities: The PCAOB’s primary responsibilities include:
- Registering public accounting firms that prepare audit reports for public companies and brokers and dealers
- Establishing auditing, quality control, ethics, independence, and other standards for registered public accounting firms
- Conducting inspections of registered public accounting firms
- Investigating and disciplining registered public accounting firms and associated persons for violations of laws, rules, or professional standards
- Oversight: The PCAOB operates under the oversight of the Securities and Exchange Commission (SEC), which appoints the PCAOB’s board members and approves its budget and rules.
- Standards: The PCAOB develops and maintains auditing standards that registered public accounting firms must follow when conducting audits of public companies, brokers, and dealers. These standards are designed to promote high-quality, independent, and informative audits.
- Inspections: The PCAOB conducts regular inspections of registered public accounting firms to assess their compliance with applicable laws, rules, and professional standards. These inspections help identify and address audit deficiencies and promote audit quality.
- Enforcement: The PCAOB has the authority to investigate potential violations by registered public accounting firms and associated persons, and to impose disciplinary actions, such as monetary penalties, censures, and bars from association with registered firms.
The PCAOB plays a critical role in enhancing the quality and integrity of public company audits, thereby protecting investors and promoting public confidence in the U.S. capital markets.