The role of the PCAOB (Essay Sample)

The role of the PCAOB
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The role of the PCAOB
PCAOB was created in the wake of corporate corruption and scandal that rocked the nations. Companies such as Tyco, Enron, and Xerox were involved in massive corruption, revising the longstanding concern about auditors' independence, effectiveness, and professional audit governance. These concerns made investors a little scared to invest in the US market. In response to investors' concerns, Congress created PCAOB with the responsibility to register and inspect public accounting firms, set auditing standards, and enforce these standards by investigating and imposing disciplinary measures for violations. Years later, PCAOB has had a significant not only on how companies are run but also on the audit profession. The PCAOB has led to the evolution of the audit profession, with its notable impacts including improving the audit quality and brought standardization in audit regulation.
The standards set by PCAOB over the past decade have brought standardization in the regulation of audit professionals. In creating PCAOB, Congress supplemented the exiting regulatory system that previously focused on management actions through rules that imposed disclosure requirements for public companies and accounting standards enforced by Security Exchange Commission (Murphy, 2014). Although auditors' role has not changed, the formation of PCAOB ended a longstanding system where auditors were allowed to set their own standards and evaluated whether the standards are met through a peer-review process. The regulatory mandate for PCAOB does not include setting standards previously set by auditors, inspecting accounting and public firms, and enforcing set standards (Murphy, 2014). The role of setting standards and enforcing the same standards have moved out of auditors' hands to an independent regulatory body under the Security and Exchange Commission's oversight (Murphy, 2014). The new system allows faster detection of deficiencies in audit reports and punishment for violation of PCAOB set standards.
The result of these regulatory changes has been an improvement in audit quality. According to Franzel (2017), the creation of PCAOB and its standards have seen a reduction and severity of audit deficiencies, with firms increasingly dedicating more resources to correcting deficiencies and improving quality control systems. PCAOB standards have seen a change in tone for top management, with organizations implementing coaching, training, and support to audit teams to enhance audit monitoring quality (Franzel, 2014). The creation of PCAOB has brought real quality control system improvement that, if maintained, can eliminate most of the audit deficiencies facing companies today.
The inspections and other quality control activities have been crucial in identifying and calling attention to audit risks, weaknesses, and problems audit professionals face. PCAOB releases annual and periodic reports that have often drawn highlighted inspection findings. The board also issues general reports, audit pra