What is the PCAOB for Audited Financial Statments?

The Public Company Accounting Oversight Board (PCAOB) is a private-sector, nonprofit corporation, created by the Sarbanes-Oxley act of 2002, and is under the jurisdiction of the SEC (Securities and Exchange Commission). The Sarbanes-Oxley Act and the creation of the PCAOB was a direct result of the accounting fraud scandals of Enron and WorldCom. The purpose of the PCAOB is to oversee auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audited financial statements. This was the first time that public companies were required to have audits on the effectiveness of their internal control over corporate financial reporting. The PCAOB has established auditing, quality control, ethics, and independence standards to be used by registered public accounting firms in the preparation of audited financial statements for publicly traded companies, as required by the Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange Commission (SEC).  

The Sarbanes-Oxley Act of 2002 requires the PCAOB to: register accounting firms that audit publicly companies; inspect registered accounting firms and their associated certified public accountant annually for those whom annually audit over 100 public companies and a minimum of once every three years for those that audit under 100, assess the degree to which the firms comply with the act, the rules of the PCAOB and the SEC, professional standards in connection with the performance and issuance of audited financial statements and attest services; related matters involving public companies, and investigate and discipline any accounting firms and related accountants who are in violation of specific laws or standards. All firms are still required to have peer review of their auditing and accounting practice in order to satisfy the American Institute of Certified Public Accountants (AICPA) membership, federal regulatory (Generally Accepted Auditing Standards) and/or state licensing requirements.  

The Public Company Accounting Oversight Board’s goal is to improve the quality of audited financial statements, reduce the risk of auditing failures, and increase public trust in financial reporting processes and of the auditing profession. To do this the PCAOB regularly issues reports detailing its inspections of public company audits. One of their main concerns resulting from their inspections is to refocus and remind auditors of the standards required of them regarding fraud and for them to be diligent about their responsibilities relating to fraud. One of the main purposes of audited financial statements is to detect material misstatements and false or missing information caused by fraud.

If you need more information about getting your financial statements audited please contact Neil D. Rischall CPA at (866) 559-6434.