Review the “Ethics in Action” scenario in Chapter 46
Write a paper of not more than 1,050 words in which you answer the following questions:
you think that the creation and work of the Public Company Accounting
Oversight Board (PCAOB) has resulted in greater independence of auditors
of public companies?
- If auditing of financial statements is
required primarily for the protection of public investors, should not
all PCAOB members be taken from the investment community that uses
audited financial statements?
- What regulatory compliance requirements apply to various business situations?
Cite at least 5 peer-reviewed references.
Format your paper consistent with APA guidelines.
Ethics in Action scenario
Figure Public Company Accounting Oversight Board
of the main features of the Sarbanes–Oxley Act (SOX) is the creation of
an independent board that oversees the audits of public companies.
Congress’s perception was that auditing firms were not sufficiently
independent of the public companies they audited due in part to the
audit firms’ receiving sizable nonaudit consulting fees from their audit
clients. Thus, SOX created a Public Company Accounting Oversight Board
(PCAOB). Public accounting firms that audit financial statements of
public companies are required to register with PCAOB and submit to its
rules. The board is charged with adopting rules establishing auditing,
quality control, ethics, and independence standards. It has the power to
regulate the nonaudit services that audit firms may perform for their
clients. The PCAOB has the power to inspect periodically public
accounting firms and to issue reports of the results of the reviews. The
purpose of inspections is to assess the degree of compliance with the
requirements of SOX, professional auditing standards, and the rules of
the PCAOB and the SEC in the performance of audits and the issuance of
audit reports of public companies. In addition, the PCAOB may
investigate and discipline audit firms and their partners and employees.
PCAOB is not a federal agency, but a nonprofit corporation with broad
regulatory power like the Financial Industry Regulatory Authority
(FINRA), a self-regulatory organization that regulates securities
brokers and dealers. It has five members, only two of which may be CPAs.
No board member may receive any share of profits or compensation from a
public accounting firm.
• Do you think that the creation and work of the PCAOB results in greater independence of auditors of public companies?
If auditing of financial statements is required primarily for the
protection of public investors, should not all PCAOB members be taken
from the investment community that uses audited financial statements?