Auditing the PCAOB: A Test to the Accountability of the Uniquely Structured Regulator of Accountants

After a slew of highly publicized corporate accounting scandals during the early 2000s at prominent companies -- including Enron, WorldCom, Adelphia, and Tyco -- public confidence in the integrity of financial reporting by public companies was undoubtedly shaken. Several major financial reporting frauds demonstrated serious weaknesses with the then self-regulated accounting profession, including the failure of auditors to detect those companies that were "cooking their books." Reacting swiftly to the public concern, Congress passed landmark legislation in 2002. Congress designed the Sarbanes-Oxley Act (SOX) to regulate the conduct of public accounting firms and to revive investors' confidence in the integrity of public companies' financial reporting and disclosures. SOX represented a radical departure from the previously self-regulated accounting profession. As a central part of SOX, Congress created the Public Company Accounting Oversight Board and provided it with extensive authority to ensure that SOX's lofty objectives were met.