Public Company Accounting Oversight Board; Will It Protect Investors?

1157 WordsJul 24, 20055 Pages
Public Company Accounting Oversight Board; Will it Protect Investors? The Public Company Accounting Oversight Board (PCAOB) was created by Sarbanes-Oxley Act of 2002. This board was created to oversee the audit of public companies, subject to the securities laws, in order to protect the interests of investors (15 USC 7201, 2002). It was created in wake of the recent financial scandals of Enron, WorldCom, and Global Crossing to name a few. This "Act" established by Congress is to create an oversight board, so that such scandals will never occur again. Will this oversight board work and will its work restore public confidence and encourage individuals to invest in the stock market again? The PCAOB is not a tax-payer funded agency.…show more content…
So who is responsible for leading the PCAOB to take the necessary steps to restore investor confidence? The chairman of the PCAOB, William McDonough, states that the PCAOB will be "stern but sympathetic supervisors" (Michaels). It appears that McDonough is taking a tough love approach, the approach he used as the president and CEO of the Reserve Bank of New York. He states; "Most of the time (at the Fed) we 'd be supportive, helpful – but if you do something wrong, watch out (Tufts)." One example of McDonough being supportive is not requiring public accounting firms to sell their tax and corporate finance practices (Michaels). To require firms to become audit only would have created animosity towards the PCAOB and further push back on any standard that the PCAOB would issue in the future. By allowing firms to keep their tax business he is reducing future conflicts and getting buy off from public accounting firms on tough auditing standards that the PCAOB is and will issue. He is trying to foster a win-win attitude. Will this approach work is hard to determine at this time. The PCAOB board is so new, only time will tell if his approach is effective or not. The PCAOB is the public accounting oversight board created by the Congress via the Sarbanes-Oxley Act. It appears the PCAOB has laid the groundwork to effectively monitor and review the public accounting

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