What Is the PCAOB Auditing Standard?
PCAOB is the acronym for the Public Company Accounting Oversight Board. The purpose of the board is to establish, manage, and regular the auditing process of public companies.
It sets the auditing standards for auditors and audit firms in Singapore to streamline the auditing process and make it fairer and more transparent.
PCAOB auditors are primarily responsible for overseeing the audits of dealers, public companies, and brokers registered with the U.S. Securities and Exchange Commission (SEC).
In this article, you will learn about PCAOB and its auditing standards.
What is PCAOB?
The Public Company Accounting Oversight Board is referred to as PCAOB. The PCAOB, a regulatory body, supervises the public company audits. The SEC appoints five members to the board that makes up the PCAOB.
Although the PCAOB’s members may come from different backgrounds, two of them must be Certified Public Accountants. PCAOB has a large team of more than 800 professionals in various departments like risk Analysis, Inspection, Enforcement, and Investigations.
How Was PCAOB Founded?
The PCAOB was founded by Congress in 2002 to better regulate the auditing industry as part of the Sarbanes-Oxley Act (SOX), which was introduced in response to many accounting disasters (such as Enron and Worldcom).
The auditing sector was self-regulatory before the PCAOB was founded. But in the early 2000s, it seemed that the general public did not receive this approach well.
The PCAOB submits reports to the Securities and Exchange Commission (SEC), which protects investors and maintains the U.S. securities markets. The PCAOB auditors are likewise under the SEC’s control.
Vision of PCAOB
The following is the official vision statement of PCAOB:
“The PCAOB seeks to be a model regulatory organization. Using innovative and cost-effective tools, the PCAOB aims to improve audit quality, reduce the risks of auditing failures in the U.S. public securities market and promote public trust in both the financial reporting process and auditing profession.”
Four Activities of PCAOB
The PCAOB accounting standard and the role of PCAOB can be divided into four main activities as follows:
Public accounting firms have to go through the PCAOB registration process. The PCAOB must be informed of the existence of various accounting firms to monitor their working procedures.
Every organization that audits the finances of publicly listed companies must register with the PCAOB. Therefore, audit firms must be familiar with the significance and working of PCAOB to operate legally and maintain auditing standards.
2. Implement Audit Standards
The PCAOB board establishes the professional auditing standards that qualified auditing firms must adhere to. These regulations are used to monitor accounting firms. The AICPA set guidelines before the PCAOB.
The PCAOB introduced its standards, reorganized the existing ones to form a single, integrated numbering system, and generally adopted the AICPA’s auditing standards. Please visit the PCAOB website for a comprehensive list of all the standards.
A CPA or CPA firm’s first concern should be the public, not the client. The Code lays forth guidelines to prevent CPAs from losing their independence. It guides in addition to examples of interactions and activities that endanger one’s actual or perceived independence.
Examples include an auditor who has a financial relationship with a client or strong relationships with people in high positions inside the client’s company.
The Code outlines the actions that a business or individual may take to eliminate or reduce dangers to independence. Activities taken to retain independence should be documented so enterprises can demonstrate their efforts.
To keep auditing standards high across the board, PCAOB auditors must ultimately enforce the Code. Such international standards are essential to all accountants, auditors, and audit firms in Singapore.
Using a system focused on risk, the PCAOB selects audit engagements for the evaluation. These inspections are conducted to determine whether an accounting company’s audit procedures and supporting documentation include errors and whether the audit firm has adequate quality controls.
Suppose the PCAOB determines that the auditor’s conclusions were not supported by adequate evidence. In that case, the inadequacy of the audit is indicated in the inspection report published on the PCAOB website.
The PCAOB auditors have the right to hold an enforcement hearing if they discover a significant violation due to the inspections. The PCAOB has the power to fine both businesses and individual auditors.
All in All
PCAOB and other pertinent accounting and auditing agencies play a significant role in sustaining public and investor confidence in accounting and auditing practices across the globe by keeping an eye on audit firms.