Page 646 - Encyclopedia of Business and Finance

eobf_P 7/5/06 3:18 PM Page 623

Public Company Accounting Oversight Board

BOARD MEMBERSHIP respect thereto by registered public accounting firms
As stated in the act, the board has five members, and associated persons
“appointed from among prominent individuals of 7. Set the budget and manage the operation of the
integrity and reputation who have a demonstrated com- board and the staff of the board
mitment to the interests of investors and the public.” Fur-
For the first four duties listed above, there are references
thermore, the members are expected to be knowledgeable to specific sections of the act.
of the nature of financial disclosures required of issuers
under the securities laws and of the obligations of those
OFFICES AND STAFF
who undertake audits of such issuers and issue reports.
The PCAOB’s headquarters are in Washington, D.C.
Two members, and only two members, are to be cer-
tified public accountants (CPAs) or have been CPAs pre- Regional offices in 2005 were in eight locations: Atlanta,
Chicago, Dallas, Denver, New York, Northern Virginia,
viously. If one of the two members is the chairperson of
the board, he or she “may not have been a practicing cer- Orange County (California), and San Francisco. The total
number of staff at the end of 2004 was 260.
tified public accountant for at least five years prior to his
or her appointment to the Board.” Members serve on a Among the key executives of the staff are the chief of
full-time basis and may not engage in any other business staff, chief accountant, the director of enforcement and
or professional activity during their service as board mem- inspections, the director of registration and inspections,
bers. and director of government operations.
Members are appointed for terms of five years and no
member may serve for more than two terms, whether or THE IMPACT ON PUBLIC
not the terms of service are consecutive. ACCOUNTING
As noted by the American Institute of Certified Public
BOARD DUTIES Accountants (AICPA) in a discussion of the impact on the
field of accounting, “the relationship between accounting
The act specifies the duties of board members with
firms and their publicly owned audit clients is different
responsibility to:
under the new law.”
1. Register public accounting firms that prepare audit Possibly the most dramatic shift is that professional
reports for issuers involvement of practitioners in rule making and monitor-
2. Establish or adopt, or both, by rule, auditing, qual- ing is no longer provided. While earlier auditing standards
ity control, ethics, independence and other stan- for publicly owned companies were promulgated by the
dards relating to the preparation of audit reports for AICPA’s Auditing Standards Board, such standards are
issuers now the responsibility of the PCAOB. The SEC contin-
ues to have ultimate responsibility and must approve the
3. Conduct inspections of registered public accounting
decisions of the PCAOB. The AICPA’s Auditing Stan-
firms
dards Board continues to function in developing guidance
4. Conduct investigations and disciplinary proceedings for nonpublicly owned companies. The inspection of
concerning, and impose appropriate sanctions where public accounting firms is no longer designed and admin-
justified upon registered public accounting firms istered by the member-sponsored organizations.
and associated persons of such firms Auditors now report and are overseen by a company’s
5. Perform such other duties or functions as the board audit committee, not management. Audit committees
(or the SEC by rule or order) determines are neces- must approve all services to be provided by the audit firm.
sary or appropriate to promote high professional Specified new information must be reported to audit
standards among and improve the quality of audit committees. All rules related to independence and quality
services offered by registered public accounting control are now provided by the PCAOB.
firms and associated persons thereof, or otherwise to
carry out this act, in order to protect investors, or to UNRESOLVED ISSUES
further the public interest
The PCAOB has been functioning since the spring of
6. Enforce compliance with this act, the rules of the 2003. Much of the guidance provided by the Auditing
board, professional standards, and the securities laws Standards Board of the AICPA was accepted as interim
relating to the preparation of audit reports and the guidance as the PCAOB reviews the auditing standards
obligations and liabilities of accountants with and makes determinations about what is to be accepted,

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 623