CReCER Meeting Managua
2012
Bruce Overton, Assistant Director
Office of International Affairs
Disclaimer
The views I express today are mine and
do not necessarily reflect the views of the
Board, individual Board members, or
other members of the Board’s staff.
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Public Company Accounting
Oversight Board

Regulator of auditors of companies to protect the
interests of investors and further the public interest in the
preparation of informative, accurate and independent
audit reports
 Auditors of companies publicly traded in the United States
 Auditors of nonpublic broker-dealers
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Created under the Sarbanes-Oxley Act of 2002 to be
independent from the accounting profession
 Reflects view by U.S. Congress that peer review was not
effective
 Board members
 Funding
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Key Structural Decisions in
Establishing the PCAOB
Independent funding mechanism
 Independent board members
 Experienced, expert, seasoned staff
 Independent enforcement and discipline
 Independent standard setting
 Publish individual inspection reports
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Funding
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The largest source of funding for the PCAOB comes
from the companies whose financial statements must
be audited by PCAOB-registered firms
Additional funding comes from brokers and dealers
A small amount of funding comes from registration fees
The U.S. Securities and Exchange Commission (SEC)
approves PCAOB’s annual budget
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SEC Oversight
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Analogy to SEC oversight of self regulatory
organizations
Appointment of Board members
Approval of rules and standards
Appeal of Board sanctions
Appeal of Board inspection reports
Appeal of denial of registration
Approval of budget and accounting support fees
Oversight of Board processes
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PCAOB’S Principal Statutory Functions
Registration
 Standard-Setting
 Inspections
 Investigations & Enforcement
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Registration
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Registration is voluntary, but only firms that are
registered with the PCAOB may conduct audits, or play a
substantial role in audits, of:
 Public companies that trade in U.S. markets
 Public or nonpublic broker-dealers
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Registration subjects firms to PCAOB oversight
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Currently, approximately 2,400 audit firms (U.S. and
non-U.S.) are registered with the PCAOB
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Of those, approximately 900 are non-U.S. firms from 88
jurisdictions
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Current PCAOB Statistics
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2,375 firms registered with the PCAOB, of which
913 non-U.S. firms are registered with the PCAOB from
88 jurisdictions
Almost 40% of all firms registered with the PCAOB are
located outside the U.S.
Approximately 25% of all registered non-U.S. firms have
at least one issuer client and must be inspected at least
every 3 years
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Standard-Setting
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Previously controlled by the profession through
AICPA’s Auditing Standards Board (ASB)
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Now exclusive authority of PCAOB (subject to
SEC approval)
 GAAS reference changed to “PCAOB standards”
 Includes auditing, quality control, ethics,
independence, and attestation standards
 Excludes accounting standards
 Adoption of AS 5 and other major standards
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Inspections

The Sarbanes-Oxley Act directs the Board to conduct a
continuing program of inspections
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Inspections assess the compliance of the firm and its
associated persons with the Act, the Rules of the Board
and the SEC and U.S. professional standards

Information obtained in inspections is confidential and
protected from discovery in legal proceedings pursuant
to Section 105(b)(5) of the Act
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Inspection Reports
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Inspection reports contain both public and
nonpublic portions
 Inspection reports do not identify an issuer by name
 The public portion of an inspection report summarizes
significant engagement deficiencies, if any, and is
posted on the PCAOB’s web site
 The nonpublic portion of a report may describe
additional detail or discuss other issues, including any
quality control criticisms or potential defects identified
in the inspection
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Enforcement and Investigations
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Separate process from Inspections
 Separate division
 Different staff
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Board may investigate possible violations by registered
public accounting firms or associated persons
Prompted by inspections, referrals from other regulatory
agencies, public announcements or filings and tips
Anonymous tip hotline (telephone and email)
Sanctions can be appealed to the SEC and then to the
federal courts; if appealed to SEC, sanctions do not take
effect and are not made public by the Board unless SEC
orders that sanctions take effect
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Enforcement and Investigations
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Range of possible sanctions
 Suspend or permanently revoke a firm’s registration
 Suspend or permanently bar an individual from
association with a registered public accounting firm
 Temporarily or permanently limit the activities,
functions or operations of a firm or associated person
 Civil monetary penalty
 Impose a censure, require additional professional
education or training, or impose any other sanction
provided in the rules of the Board
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Global Developments in Independent
Auditor Oversight
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EU Directive on Statutory Audit
 European countries obligated under Directive:*
 France - High Council for Statutory Auditors
 Finland – Auditing Board of the Central Chamber of
Commerce
 Germany - Auditor Oversight Commission
 The Netherlands - Authority for the Financial Markets
 Norway - Financial Supervisory Authority
 Spain – Accounting & Auditing Institute
 Sweden - Supervisory Board of Public Accountants
 UK – Federal Reporting Council
* This list is not exhaustive
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Global Developments in Independent
Auditor Oversight
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Other countries:
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Australian Securities and Investments Commission
Canadian Public Accountability Board
Japan Certified Public Accountants and Auditing Oversight
Board
Korea Financial Supervisory Service
Malaysian Accounting Oversight Board
Singapore Accounting and Corporate Regulatory Authority
South Africa Independent Regulatory Board for Auditors
Switzerland Federal Audit Oversight Authority
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Global Developments in Independent
Auditor Oversight
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International Forum of Independent Audit Regulators
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Organization of independent auditor oversight entities
Established in September 2006
Membership criteria:
 Independent of auditing profession (governing body and
funding)
 Acts in the public interest and, in particular, conducts or
oversees inspections program
Purpose is to bring auditor oversight entities together to share
information and exchange ideas
Currently 44 member countries
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