The Public Company Accounting Oversight Board (PCAOB) is a Congressionally-established nonprofit that assesses audits of public companies in the United States to protect investors' interests. The PCAOB also oversees broker-dealer audits, including compliance reports filed under federal securities laws.
The five members of the PCAOB Board are appointed to staggered five-year terms by the Securities and Exchange Commission (SEC) after consultation with the Chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury. The SEC has oversight authority over the PCAOB, including the approval of rules, standards and budget.
The PCAOB was established as part of the Sarbanes-Oxley Act (SOX), which required that U.S. public company audits be subject to external and independent oversight. Under SOX, accounting firms must register with the PCAOB in order to prepare, issue or participate in audit reports for issuers, brokers and dealers. Non-U.S. accounting firms that furnish, prepare or play a substantial role in preparing audit reports for any U.S.-based issuer, broker and dealer also are subject to PCAOB rules.
The PCAOB has authority to investigate and discipline registered public accounting firms and persons associated with those firms for noncompliance with SOX, SEC regulations and other standards governing audits of public companies, brokers and dealers. PCAOB inspects firms' audit reports, performance of audits, issuance of audit reports, audit logs and other relevant material to ensure regulatory compliance. SOX requires the PCAOB conduct inspections annually for firms that regularly provide audit reports for more than 100 issuers, and at least triennially for firms that regularly provide audit reports for 100 or fewer issuers.
When violations are found, the PCAOB can impose appropriate sanctions that include suspension or revocation of an auditor's registration, suspension or barring an individual from associating with a registered public accounting firm, and fines. The PCAOB may also require quality control improvements, additional training and independent audit monitoring.
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