Public Company Accounting Oversight Board

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1. Introduction Public Company Accounting Oversight Board (PCAOB), a nonprofit corporation that established by Congress and created by Sarbanes- Oxley Act, aims to supervise the audit of the public registered companies to make sure their reports conform the requirements of fairness and independence, in order to protect the interest of information users and investors (“PCAOB”, 2015). Actually, there are three major duties that PCAOB serves: setting auditing standards, inspecting registered public accounting firms and enforcing auditing standards; inspecting registered public accounting firms will be discussed in detail in this paper. The inspection is made by PCAOB and is designed to identify the deficiencies and weakness of audit…show more content…
2. The inspection process As discussed above, the inspection process aims to identify and address the deficiencies and weakness that related to the audit procedures of a firm. In order to achieve this goal, the PCAOB inspection process is focused on two significant inspection procedures: (1) to evaluate the audit performance in specific audit engagements; (2) to evaluate firm’s quality control system to figure out whether the operation of the system works effectively. In fact, the PCAOB inspection team does not review all the audits for finding defects in this firm; instead, the team selects engagements for inspection based on a risk-based approach (Xi, 2013). As for review of selected engagements, according to PCAOB (2012), it consists of the evaluation of auditing for firm’s financial statements and the assessment of auditing for internal control. During this process, the inspection team reviews the relevant audit documents in selected areas and then has a discussion, if necessary, with the audit firm’s engagement personnel based on the result of the review. Further, the inspection team also has responsibility to analyze the potential adjustments, which in financial statements that were not made by audit firm before. Besides that, the inspection team needs to check the written communication records between the firms and the audit committee for inspecting some engagements, especially in the largest companies (PCAOB, 2012).
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