A Practical Guide to the New PCAOB Reporting Requirements

Topics: Auditing, Audit, U.S. Securities and Exchange Commission Pages: 6 (2061 words) Published: May 3, 2013

A Practical Guide to the New PCAOB Reporting Requirements
Valerie D. Roseberry
Strayer University

Professor, Dr. Ahmad Abudiab
ACC 571 – Forensic Accounting
Sunday, February 03, 2013

A Practical Guide to the New PCAOB Reporting Requirements
The Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation that was established by Congress and placed under the jurisdiction of the Securities Exchange Commission. The Sarbanes-Oxley Act of 2002 (SOX) and the creation of the PCAOB was a direct result of the accounting fraud scandals of Enron and WorldCom, which resulted in major losses for investors and a precipitous decline in investor confidence in the U.S. capital markets. Therefore, the PCAOB was established 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. SOX require that any accounting firm that prepares or issues and audit report with respect to a U.S. public company must register with the PCAOB. The requirements of the Sarbanes-Oxley Act were intended to strengthen public companies’ internal controls over financial reporting and have served to sharpen the focus of senior management, boards of directors, audit committees, internal audit departments, and external auditors on their responsibilities for reliable financial reporting. Although the Board has no authority over public companies, PCAOB work has important implications for public companies and their audit committees. Justify how the reporting requirements of the PCAOB reduce the chance of financial fraud. Historically, most major financial statement frauds have involved senior management, who are in a unique position to perpetrate fraud by overriding controls and acting in collusion with other employees. When fraud occurs at lower levels in an organization, individuals may not initially realize that they are committing fraud; they may see themselves as simply doing what is expected to “make their numbers.” The Sarbanes-Oxley Act was signed into law on July 30, 2002 to address corporate governance and accountability as well as public accounting responsibilities in improving the quality, reliability, integrity and transparency of financial reports. The goal of the PCAOB is to improve quality of audited financial statements, reduce the risk of auditing failures, and increase public trust in the financial reporting processes and of the auditing profession. Beginning on December 31, 2009, accounting firms were required to register with the PCAOB and file annual and current reports. The Act provides sweeping measures aimed at * Establishing higher standards for corporate governance and accountability * Creating an independent regulatory framework for the accounting profession * Enhancing the quality and transparency of financial reports * Developing severe civil and criminal penalties for corporate wrongdoers * Establishing new protections for corporate whistleblowers (Forensic Accounting and Fraud examination, Page 158). Up until December 31, 2009, the PCAOB had no requirement for annual reports or amendments to report material changes in initial registration information. These rules implement the requirement of SOX section 102(d) that registered public accounting firms must report annual information about the firms and their audit practices and submit, as specified by the PCAOB or the SEC, more frequent information necessary to update the information previously filed with the PCAOB. As required by SOX section 102(e), all registration applications and annual reports will be made publicly available, subject to PCAOB and SEC rules on the confidentiality of proprietary and personal information. To justify how the reporting requirements of the PCAOB reduce the chance of financial fraud. One of the most significant changes affected...
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