The AICPA provides guidance across a spectrum of accounting services that it members perform for a variety of companies. Currently, there are 1, firms registered. The PCAOB board dictates the professional auditing standards that registered auditing firms must use.
These standards are utilized to monitor accounting firms. The Code is often referred to as their Independence standards. The Code explains the actions that a firm or individuals may take to eliminate or reduce threats to independence. Efforts taken to ensure independence should be documented so firms can demonstrate their efforts to remain independent. These areas include internal control over financial reporting, assessing and responding to risks of material misstatement, and accounting estimates.
The goal of these inspections is to determine if there are errors in how an accounting firm performed its audit procedures and documentation and if there are adequate quality controls in place within the audit firm. Finally, as a result of the inspections, if the board determines a serious violation has occurred, an enforcement hearing could be conducted.
Over the years, the relationship between the two entities occasionally has been strained when their regulatory priorities have diverged. Furthermore, while some observers warned that the PCAOB could get too close to public company auditors i. The negative commentary from Forbes coincided with an ominous development for the PCAOB—a legal challenge that went all the way to the U.
Supreme Court. The central issue in the case, Free Enterprise Fund v. The Supreme Court did not do so. One measure is financial restatements by public companies: Susan Scholz of the University of Kansas has found that the number of U. Controversy has arisen recently about the pace of PCAOB standards setting, and the inspections process remains a work in progress with room for improvement.
Another important data set is polling on investor confidence. Since , the CAQ has commissioned an annual survey of U. In , confidence in investing in U.
These metrics do not signal the end of the story. The public company auditing profession has made great strides since , but PCAOB inspectors continue to find audit deficiencies, and—given their risk-based approach—they always will. The slight rise in restatements by accelerated filers also bears watching closely. Thus, the profession's focus on continuous improvement remains essential to stay abreast of increasingly complex business transactions, fraud risk, the challenges of globalization, the swift pace of technological change, and the ongoing need to attract the best and brightest.
While these challenges are daunting, the profession will rise to meet them in many ways. As executive director of the CAQ since it was founded in , I have witnessed firsthand the profession's vigorous and widespread efforts in the following areas, all of which will remain critical to future improvement and building investor confidence. The profession has engaged with policymakers in the United States and overseas on key policy initiatives such as developing audit quality indicators and updating the auditor's report.
By commenting on proposals and in regular face-to-face meetings with policymakers, the profession has stayed abreast of regulator concerns, offered constructive input, and advocated for effective, practical standards setting and rulemaking.
Through bodies like the AICPA and the CAQ, the profession continues to develop new resources and guidance to help public company auditors enhance their independence, objectivity, and professional skepticism. Recent CAQ member alerts, for example, have addressed issues such as the auditor's role in cybersecurity, and key risk areas for auditors.
Christina Ho has 28 years of broad experience in public finance, policy development, accounting and auditing, disclosure modernization, data analytics, and technology innovation.
Ho has held other senior positions with the U. She earned a B. Kara M. Stein served as a Commissioner of the SEC from to Earlier in her career, she was Senior Policy Advisor for securities and banking matters for U. Stein earned a J. Anthony Tony C. Thompson held senior positions at the U. Department of Agriculture, where he was responsible for leading a workforce of more than personnel and a broad range of programs, including budget and financial management.
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