IFIAR 2015 Member Profile - PCAOB
Jurisdiction
United States of America (USA)
1. Organization
Insert the name of the Organization, both in the local language and in
English:
Public Company Accounting Oversight Board (“PCAOB”)
Include relevant contact information, including postal address, telephone
numbers, a link to the website and other relevant information:
For additional information, please contact:
S. Bruce Wilson
Director, Office of International Affairs
Public Company Accounting Oversight Board (PCAOB)
1666 K St, NW, Suite 201
Washington, DC 20006
Office - 202-591-4285
wilsonbruce@pcaobus.org
www.pcaobus.org
Include the basis for establishment and the mission/responsibilities and
authority with respect to audit regulation:
The PCAOB was created by the Sarbanes-Oxley Act of 2002 (the “Act”), as
amended. Section 101(a) of the Act states that the PCAOB is established
“to oversee the audit of companies that are subject to the securities laws,
and related matters, in order to protect the interests of investors and
further the public interest in the preparation of informative, accurate and
independent audit reports.”
The Board has four primary responsibilities:
1. Registration of accounting firms that audit public companies
trading in US securities markets, brokers, or dealers;
2. Inspection of registered accounting firms;
3. Establishment of standards for auditing, quality control, ethics,
and independence, as well as attestation, for registered accounting firms;
and
4. Investigation and discipline of registered accounting firms and
their associated persons for violations of law or professional
standards.
All PCAOB rules are adopted by the Board and approved by the Securities
and Exchange Commission (‘SEC’). As of December 31, 2014, the PCAOB
had a total of 809 employees. In addition to the headquarters in
Washington, DC, the PCAOB operates eight regional offices and seven
satellite offices.
IFIAR 2015 Member Profile - PCAOB
Have there been any changes to your governing legislation since
completing last year’s Member Profile?
☐ Yes
 No
If yes, please describe the changes:
2. Governing
Body
Composition
and Members
Describe the current composition of the organization’s governing body:
Pursuant to Section 101 of the Act, the Board shall consist of five
members, including a chairperson. The members of the Board are
appointed by the SEC, after consultation with the Chairman of the Board
of Governors of the Federal Reserve System and the Secretary of the U.S.
Department of Treasury.
The current Board members are:
 Chairman: James R. Doty
 Member: Lewis H. Ferguson
 Member: Jeanette M. Franzel
 Member: Jay D. Hanson
 Member: Steven B. Harris
What are the eligibility criteria / requirements or composition
requirements for the members of the governing body?
The Act requires that two, and only two, of the five Board members be or
have been certified public accountants, provided that, if one of those two
members is the chairperson, he or she may not have been a practicing
certified public accountant for at least five years prior to his or her
appointment to the Board. The Act also requires that all members of the
Board serve on a full-time basis, and may not, concurrent with service on
the Board, be employed by any other person or engage in any other
professional or business activity.
Is each member of the governing body independent of the audit
profession? The audit profession includes, for example: audit firms,
professional bodies and bodies or entities associated with the audit
profession. 1
 Yes
1
☐ No
For purposes of this questionnaire, the audit profession does not include an individual who is a
CPA, Chartered Accountant, or holder of another equivalent qualification, but who is not
employed by a registered audit firm, nor employed by or acting on behalf of a professional
accountancy body.
IFIAR 2015 Member Profile - PCAOB
Are the majority of the members of the governing body non-practitioners?
 Yes
☐ No
If not all members of the governing body are independent, what safeguards
are in place to provide for the organization’s overall independence from
the audit profession?
Not applicable
Is there a restriction or recusal process that is applicable to members of the
governing body of your organization who are current or former
auditors/practitioners?
 Yes
☐ No
Does this include a “cooling-off” period for former auditors?
 Yes
☐ No
If yes to either of the above, please describe:
The Board’s Ethics Code provides that, for a period of 12 months from the
date of appointment, a Board member may not participate in the making
of any decision which is reasonably likely to have a material effect, direct
or indirect, on the Board member’s former employer, business partner,
or client. This rule applies to the Board member’s employers, business
partners, and clients during the five years preceding the Board member’s
appointment. In addition to this “cooling off” period, the Ethics Code
provides that the Board member shall recuse himself or herself from any
Board function or activities if a Board member becomes, or reasonably
should become, aware of facts that would lead a reasonable person to
believe that he or she, or his or her spouse, spousal equivalent, or
dependents, may have a financial interest or personal relationship which
might reasonably create the appearance of affecting his or her objectivity
with respect to the Board’s function or activities.
Board members shall be restricted from practice before the Board, and
the Commission with respect to Board-related matters, for one year
following termination of Board membership. In addition, former Board
members shall not practice before the Board, or the Commission with
respect to Board-related matters, on a particular matter in which the
Board member participated personally and substantially as a Board
member.
IFIAR 2015 Member Profile - PCAOB
The Chairperson may not have been a practicing certified public
accountant for at least five years prior to his or her appointment to the
Board.
Other than the governing body, are members of the profession involved in
your organization (e.g., in a management or inspection function)?
☐ Yes
 No
If yes, please describe their role:
3. Funding
Arrangements
Describe the main funding arrangements, including the setting and
approval of the budget and the fees, if any:
Section 109 of the Act provides that funds to cover the Board's annual
budget (less registration fees and annual fees paid by public accounting
firms as mentioned below) are to be collected from "issuers, brokers and
dealers" as defined in the Act. The amount due from such companies is
referred to in the Act as the Board's "accounting support fee." Accounting
support fees fund the Board's operations. Once each year, the Board will
compute the aggregate amount of such fees that will be assessed to
issuers, brokers and dealers based on the Board's budget for that year, as
approved by the SEC. Failure to pay constitutes a violation of the
Securities Exchange Act of 1934, as amended, and the Board refers such
failures to the SEC. In addition to the accounting support fees, fees are
also collected from public accounting firms to cover the costs of
processing and reviewing registration applications, and for the costs of
processing and reviewing periodic reports that firms are required to
submit.
Is the funding free from undue influence by the profession?
 Yes
4. Inspection
System
☐ No
Do you have the responsibility for recurring inspections of audit firms
undertaking audits of public interest entities?
 Yes
☐ No
Is this responsibility undertaken directly or through oversight of inspection
conducted by another party?
 Directly
☐ Through Oversight
IFIAR 2015 Member Profile - PCAOB
If through oversight of another party, please describe the other party, its
role, and the arrangements for oversight:
Please describe the requirements and practices regarding the frequency of
inspections:
Accounting firms (US and non-US) that prepare or issue audit reports on
public companies, brokers or dealers registered with the U.S. SEC, or play
a substantial role in the preparation or issuance of such audits are
required to register with the Board. The Board is also required by the Act
to conduct a continuing program of inspections of registered public
accounting firms. In those inspections, the Board assesses compliance
with the Act, the rules of the Board, the rules of the SEC, and professional
standards, in connection with the firm’s performance of audits, issuance
of audit reports, and related matters involving US public companies. The
Act requires the Board to conduct inspections annually for registered
firms that provide audit reports for more than 100 US-registered public
companies and at least triennially for registered firms that regularly
provide audit reports for 100 or fewer US-registered public companies.
5. Audit
Financial
Market
and Provide the number of audit firms subject to inspections. Include an
indication of the number of public interest audits and other audits that fall
under the member organization’s oversight / mandate.
The PCAOB’s mandate includes only the oversight of the registered firms
that audit public companies, brokers and dealers registered with the U.S.
SEC. The PCAOB does not have oversight over the audits of other types of
entities. As of December 31, 2014, 2,201 audit firms were registered with
the Board, including 1,300 firms in the United States and 901 non-U.S.
firms located in 89 jurisdictions.
The Act requires the Board to conduct inspections annually for registered
firms that provide audit reports for more than 100 US public companies
and at least triennially for registered firms that regularly provide audit
reports for 100 or fewer US public companies. The number of firms
subject to inspection triennially varies based on how many registered
firms have performed audit work for public companies that brings them
within the scope of the inspection requirement.
In 2011, the Board adopted a temporary rule to establish an interim
inspection program for firms that audit brokers and dealers while the
Board considers the scope and other elements of a permanent inspection
program. In August 2012, the Board released its first report on the
progress of the interim inspection program for auditors of brokers and
dealers, providing an overview of the new interim program and the audit
IFIAR 2015 Member Profile - PCAOB
deficiencies identified in the initial group of inspected audits of brokers
and dealers.
The PCAOB regularly inspects registered accounting firms that perform
audits of public companies and other issuers. In 2014, the PCAOB
inspected 219 firms, including 162 firms in the United States and 57 nonU.S. firms. The PCAOB also conducts an interim program of inspections
of firms that audit brokers and dealers registered with the U.S. Securities
and Exchange Commission. In 2014, the PCAOB inspected 66 such firms.
Since it began inspecting audit firms in non-U.S. jurisdictions in 2005, the
PCAOB has conducted inspections in 44 non-U.S. jurisdictions, including
joint inspections with audit regulators in 15 non-U.S jurisdictions.
IFIAR 2015 Member Profile - PCAOB
What are the sizes and market shares of each of the largest audit firms?
Fiscal Year 2013 Opinions Issued and Audit Fees Charged by Firms
Headquartered
in
the
U.S.
(Excludes Mutual Funds and Trusts)
% Share of:
Audit Firm
Deloitte & Touche LLP
Ernst & Young LLP
KPMG LLP
PricewaterhouseCoopers LLP
BDO USA, LLP
Grant Thornton LLP
All GPPC firms
Non-GPPC firms
Total
Audit
Opinions
Issued
Market
Cap
of
Issuers
Audited
Audit
Fees
11%
15%
10%
11%
4%
5%
55%
45%
100%
out
of
approx
8,100
opinions
20%
30%
17%
30%
1%
1%
99%
1%
100%
out
of
approx
$23
trillion
22%
25%
16%
30%
1%
2%
96%
4%
100%
out of
approx
$10
billion
Sources: Percentages above on Opinions Issued and Audit Fees are
derived from Audit Analytics data. Market Cap data is from Standard &
Poors.
6. Main
Other
Tasks
Performed by
Member
Describe whether the Member also performs other tasks, such as
registration, education, standard setting and enforcement in the area of
auditing, or other supervisory tasks, such as supervision of financial
reporting or securities regulation:
The mission of the PCAOB is to oversee the auditors of public companies,
brokers and dealers in order to protect the interests of investors and
further the public interest in the preparation of informative, accurate,
and independent audit reports. Section 101 of the Act provides that the
PCAOB’s duties include:
1. to register public accounting firms that prepare audit reports for
issuers, brokers and dealers in accordance with Section 102 of the
Act;
IFIAR 2015 Member Profile - PCAOB
2. to establish or adopt, or both, by rule auditing, quality control,
ethics, independence and other standards relating to the
preparation of audit reports for issuers, brokers and dealers in
accordance with Section 103 of the Act;
3. to conduct inspections of registered public accounting firms in
accordance with Section 104 of the Act and the rules of the PCAOB;
4. to conduct investigations and disciplinary proceedings concerning,
and impose appropriate sanctions, where justified, upon registered
public accounting firms and associated persons of such firms, in
accordance with Section 105 of the Act;
5. to perform such other duties or functions as the PCAOB (or the SEC),
by rule or order) determines are necessary or appropriate to
promote high professional standards among, and improve the
quality of audit services offered by, registered public accounting
firms and associated persons thereof, or otherwise to carry out the
Act, in order to protect investors, or further the public interest;
6. to enforce compliance with the Act, the rules of the PCAOB,
professional standards, and the securities laws relating to the
preparation and issuance of audit reports and the obligations and
liabilities of accountants with respect thereto, by registered public
accounting firms and associated persons thereof; and
7. to set the budget and manage the operations of the PCAOB and the
staff of the PCAOB.
7. Major Events Describe any recent major events and activities:
and Activities
In 2014, the PCAOB continued conducting and issuing reports on audit
inspections. See here for inspection reports and here for the PCAOB’s
most recent Strategic Plan.
Information on the following items can be found here.
1. Standards
 May 7, 2014 – The PCAOB issued a supplemental request for
comment on its proposal for the reorganization of PCAOB
auditing standards into a topical structure with a single
integrated numbering system. The proposed reorganization is
intended to present the standards in a logical order that generally
follows the flow of the audit process.

May 15, 2014 – The PCAOB released staff guidance on Economic
Analysis in PCAOB standard setting. This guidance established an
analytical framework for staff to evaluate the economic
implications of standard-setting projects that are presented for
Board consideration.
IFIAR 2015 Member Profile - PCAOB

June 10, 2014 – The PCAOB adopted a new auditing standard
(Auditing Standard No. 18, Related Parties) and amendments to
other auditing standards to strengthen auditor performance
requirements in three critical areas of the audit: related party
transactions, significant unusual transactions, and a company's
financial relationships and transactions with its executive
officers.

August 19, 2014 - The PCAOB issued for public comment a Staff
Consultation Paper on standard-setting activities related to
auditing accounting estimates and fair value measurements.
September 9, 2014 – In light of significant audit deficiencies in the
area of auditing revenue that have been frequently observed
during PCAOB inspections, the PCAOB issued a Staff Audit
Practice Alert to highlight for auditors the requirements for
auditing revenue under PCAOB standards.


September 22, 2014 – The PCAOB issued a Staff Audit Practice
Alert to remind auditors to continue to follow existing PCAOB
standards when considering a company's ability to continue as a
going concern. This alert was issued in light of changes to U.S.
generally accepted accounting principles, or U.S. GAAP, about
disclosure of uncertainties about a company's ability to continue
as a going concern.
2. Enforcement
 May 7, 2014 – The PCAOB announced settled disciplinary orders
imposing sanctions on two audit firms and four individuals for
violations of the federal securities laws and PCAOB rules and
auditing standards relating to auditor independence, quality
control, and audit documentation.

July 7, 2014 – The PCAOB announced a settled disciplinary order
imposing sanctions on a former PricewaterhouseCoopers LLP
partner for audit failures, citing violations of ignoring or failing to
properly address numerous indicators of improperly recognized
revenue in significant unusual transactions.

December 8, 2014 – The PCAOB announced settled disciplinary
orders imposing sanctions on seven audit firms for violating rules
requiring that the auditors of brokers and dealers be independent
of their audit clients.

December 17, 2014 – The PCAOB announced a settled disciplinary
order imposing sanctions on a partner of Grant Thornton Japan
for audit failures.
IFIAR 2015 Member Profile - PCAOB
3. Meetings & Events
 April 2-3, 2014 – The PCAOB held a public meeting to obtain
further input on a proposal to enhance the auditor's reporting
model. (March 20, 2014 news release)

June 24-25, 2014 – The PCAOB held a meeting of its Standing
Advisory Group to discuss recent PCAOB developments and the
Board’s current standard setting agenda. Additionally, the
agenda included discussion of initiatives to improve audit quality,
cybersecurity, revenue recognition, and going concern. (June 10,
2014 news release)

October 2, 2014 – The PCAOB held a Standing Advisory Group
meeting to discuss the potential need for changes to PCAOB
standards for auditing accounting estimates and fair value
measurements. (September 18, 2014 news release)

October 20, 2014 – The PCAOB held an Investor Advisory Group
meeting to discuss the following: the audit firm business model
and incentives; how to improve audit quality and the relevancy
of the audit; and the relationship and role of the auditor with the
audit committee. (September 29, 2014 news release)

October 27, 2014 – The PCAOB’s Center for Economic Analysis, in
conjunction with the Journal of Accounting Research, held its first
annual Economic Conference on Auditing and Capital Markets.
The conference in Washington, DC, was attended by more than
120 researchers from around the world.

November 20-21, 2014 – The PCAOB held a Standing Advisory
Group meeting with a focus on fraud. Other topics discussed
include auditing revenue and a summary of comments received
on the staff consultation paper on auditing accounting estimates
and fair value measurements. (November 6, 2014 news release)

November 19, 2014 – The PCAOB hosted more than 60 officials
from audit regulators in 30 non-US jurisdictions and from five
international organizations during its eighth annual International
Auditor Regulatory Institute.
4. International Affairs
 March 31, 2014 – The PCAOB announced a cooperative
agreement with the Supervisory Board of Public Accountants (RN)
of Sweden relating to the oversight of audit firms subject to the
regulatory jurisdictions of both regulators.
IFIAR 2015 Member Profile - PCAOB

July 18, 2014 – The PCAOB announced a cooperative arrangement
with the Danish Business Authority (DBA) for the oversight of
audit firms subject to the regulatory jurisdictions of both
regulators.
5. Broker-Dealer Audit Inspection Program
 March 20, 2014 – The PCAOB announced 2014 Forums on auditing
smaller broker-dealers.

June 26, 2014 – The PCAOB released staff guidance to help
auditors of brokers and dealers registered with the Securities and
Exchange Commission to plan and perform audits in accordance
with PCAOB standards as mandated by the Dodd-Frank Wall
Street Reform and Consumer Protection Act and SEC rules.

August 18, 2014 – The PCAOB released its third progress report
on PCAOB inspections of broker and dealer auditors, which
continued to show a high number of findings.