Watching the Watchers: A Close Look at PCAOB after Five Years

A lack of confidence in financial reporting, perceptions of conflicts of interests on auditor independence, and unsound corporate governance relating to massive audit failures directed the federal government to impose stricter oversight regulation. PCAOB started its first inspections of registered public accounting firms in 2004, and what follows is an overview of the inspection process and a presentation of what the accounting industry has learned. The fundamental objective of inspections is to determine compliance with Sarbanes-Oxley, PCAOB rules and standards, SEC rules, professional standards, and the firm's own quality control policies. PCAOB is responsible for identifying rules violations as exhibited in any act, practice, or omission to act by public accounting firms. PCAOB is a relatively new regulatory body, and its role is still evolving, CPAs need to be aware of potential changes in regulatory requirements in the years ahead.