International Standards On Auditing Standards

In the United States, the International Auditing and Assurance Standards Board (IAASB) works as an independent body, setting standards for auditing under the International Federation of Accountants (IFAC). The IAASB establishes the best quality auditing, quality control, assurance, and related services in order to ensure uniformity of practice by professionals all across the world. Until 2002, the IAASB was formerly known as the International Auditing Practices Committee or IAPC. With such high standards in place for auditing and assurance, public confidence is therefore improved (International Federation of Accountants, 2014).

Clarified statements on auditing standards (SAS) are issued by the Auditing Standards Board (ASB). SAS #122-127 were effective for audits ending on or after December 15, 2012. The ASB has completed the Clarity project with the issuance of SAS # 128 in February 2014, effective for audits of financial statement for period ending on or after December 15, 2014.

The Public Company Accounting Oversight Board provides oversight for auditors of public companies, including establishing auditing and quality control standards for public company audits, and performing inspections of the quality controls at audit firms performing those audits (Arens, Elder, & Beasley, 2010). The PCAOB has responsibility for establishing auditing standards for public companies, while the Auditing Standards Board (ASB) of the AICPA establishes auditing standards for private companies. The ASB previously had responsibility for establishing auditing standards for both public and private companies (Arens, Elder, & Beasley, 2010). Existing auditing standards were adopted by the PCAOB as interim auditing standards for public company audits (Arens, Elder, & Beasley, 2010).

JPMorgan Chase Bank is a publicly traded company and uses an external-independent auditing firm, PricewaterhouseCoopers LLP, to provide an annual audit. JPMorgan

Even if uniformity were to be reached, the IOSCO disclosure standards do not encircle all of the information required of an easy access to cross-border capital markets.

There is generally quite wide acceptance that convergence in accounting and auditing standards is desirable. In this essay, I am going to evaluate the challenge of convergence, why it is necessary and the benefit it brings back for an economy.

The act is an exhaustive piece of legislation that contains eleven major section and some of the most important titles outline requirements on auditor independence, analyst conflict of interests, corporate responsibility, enhanced financial disclosures, internal controls assessment, and corporate fraud accountability (Bainbridge, 2007). One of the main benefits of the legislation is to establish auditor independence requirements and rules for the prevention of conflicts of interest in particular by prohibiting auditing firms from offering other services. Prior to Sarbanes–Oxley, the auditing professionals were self-regulated and the decisions that controlled the industry, such as violation of ethical standards, were made largely by auditors themselves (Verschoor, 2012). In order to prevent conflict of interests, the Sarbanes–Oxley Act grants the PCAOB authority to oversee and regulate auditing firms, conduct investigations, and impose disciplinary sanctions against accounting firms (McDonough, 2004). Another provision of the Act is requiring senior executives to be personally accountable and responsible for the financial information reports by certifying that the information is correct.(Welch, 2006). A byproduct of the law implementation is a significant quality improvement on accounting practices;

The first title of the Sarbanes-Oxley Act of 2002 relates to the Public Company Accounting Oversight Board (PCAOB) division. The Sarbanes-Oxley Act provided for the creation of PCAOB as an oversight organization to regulate the methods and procedures for auditors while they are performing an audit on a publically traded company. PCAOB is in charge of registering auditors that will be participating in publically traded company audits in addition to monitoring the quality of the audit work that is produced. PCAOB also establishes guidelines and directives that are applicable to all publically traded company audits. Lastly, PCAOB not only monitors the work and actions of independent audit firms, they sanction and enforce disciplinary measure against firms

To start, the agency assigned to oversee the implementation of the Sarbanes-Oxley Act is the Securities and Exchanged Commission (SEC). It created the Public Company Accounting Oversight Board (PCAOB) to monitor and evaluate auditing reports from accounting firms to ensure the quality of financial statements and that full corporate governance is being carried out. It sets a standard that all firms must follow closely. PCAOB is an independent organization whose primary role is to catch and recognize any suspicious and unethical activities in accounting firms and oversee that firms are following the compliances rules of SOX. A typical auditing report created by PCAOB is divided into two parts. According the Nagy (2014), the first part consists of a list of any flaws in compliance and auditing errors and the second part is quality control. The purpose of creating PCAOB is to promise investors and the general public that firms are following the strict compliance policy of SOX and that the SEC is aware of the financial situation of companies because it is keeping a close eye on monitoring business

The Sarbanes Oxley Act of 2002 enacted many new legislations including the creation of the Public Company Accounting Oversight Board, which inspects audits of public companies, increased regulations on auditor independence, prohibiting certain non-audit activities, increased corporate responsibility of company executives and management for financial reports, timely and accurate disclosure requirements, and management’s responsibility to design and test the effectiveness of internal controls. These legislations are just a few of the key sections of the Sarbanes Oxley Act among many others and have has a great impact on public auditors and the audit process of public companies. Although many of these new requirements and regulations require more detail, time, and money to implement, they help to protect the public interest of investors and restore the public’s trust in auditors and the financial reports of corporations and business that must follow the policies the forth in the Sarbanes Oxley Act.

Sarbanes-Oxley Act was enforced in the past but caught everyone’s attention when drastic audit failures from Enron and Worldcom happened. An enhanced act (SOX) was enacted in 2002 improving audit quality. In particular, section 404 provides guidance of assessment to internal control. For an accounting perspective, internal control is a system for internal and external auditors to measure performance and recommend the improvement of the control. It is definitely correct that both enforcement and the system are to address the risks of frauds. In the meantime, a new regulatory agency, the Public Company Accounting Oversight Board (PCAOB) was created to monitor the work of public accountants. Among SOX and the PCAOB, accounting

The Public Company Accounting Oversight Board (PCAOB) was established as a result of corporate scandals that led to the passing of the Sarbanes-Oxley Act of 2002. This paper will explore the circumstances that led to the creation of the PCAOB. I will then go on to discuss the roles and responsibilities of the PCAOB, and suggestions for improvement of the PCAOB auditing process.

Section 101 of the Sarbanes-Oxley Act establishes the Public Company Accounting Oversights Board (PCAOB). The Board consists of five financially-literate members that are appointed for five-year terms. Three of these members must not be a CPA currently nor have been one in the past. The other two members must be, previously or currently, a certified public accountant. The main focus of this Board is (1) to register along with discipline accounting firms that prepare audit reports on companies that are public; (2) conduct inspections and/or investigations of registered accounting firms that audit public companies; and (3) establish audit and accounting standards.

PThe Public Company Accounting Oversight Board (PCAOB) has the authorization and duty to inspect auditing firms to make sure they are in compliance with law, rules, and professional standards in connection with the auditing reports of public companies. Some deficiencies noted by the PCAOB in the inspection reports of Deloitte & Touche LLP, KPMG, BDO LLP, and PricewaterhouseCoopers LLP are discussed in the following paper.

For nonpublic companies auditing guidance are issued by the American Institute of Certified Public Accountants, AICPA. Prior to PCAOB, AICPA served as the primary governing body of public accounting profession. Since the roles have changed with PCAOB regarding the auditing standards for public companies, the AICPA is still developing standards for the nonpublic companies. The organization has developed four fundamental principles that govern an audit conducted in accordance with GAAP. The principles are: