Public Company Accounting Oversight Board (PCAOB)

Definition

The Public Company Accounting Oversight Board (PCAOB) is a nonprofit organization established by Congress to oversee the audits of public companies. Its mission is to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports.

5 Must Know Facts For Your Next Test

1. The PCAOB was created by the Sarbanes-Oxley Act of 2002.
2. It establishes auditing and related professional practice standards for registered public accounting firms.
3. The PCAOB conducts inspections of accounting firms that audit public companies to ensure compliance with laws and standards.
4. It has authority to investigate and discipline firms and individuals for violations of laws, rules, standards, or professional conduct.
5. The PCAOB works closely with the Securities and Exchange Commission (SEC), which oversees its activities.

Review Questions

• What legislation led to the creation of the PCAOB?
• What are some of the main functions of the PCAOB?
• How does the PCAOB contribute to protecting investors?

Related terms

Sarbanes-Oxley Act:

A law passed in response to financial scandals to protect investors by improving the accuracy and reliability of corporate disclosures.

Securities and Exchange Commission (SEC):

A federal agency responsible for enforcing federal securities laws and regulating the securities industry.

Auditing Standards: Guidelines established by authoritative bodies like PCAOB that auditors must follow when conducting audits.