A Practical Guide to the New PCAOB Reporting Requirements
Running Header: PCAOB REPORTING REQUIREMENTS
A Practical Guide to the New PCAOB Reporting Requirements
Valerie D. Roseberry
Strayer University
Professor, Dr. Ahmad Abudiab
ACC 571 – Forensic Accounting
Sunday, February 03, 2013
A Practical Guide to the New PCAOB Reporting Requirements
The Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation that was established by Congress and placed under the jurisdiction of the Securities Exchange Commission. The Sarbanes-Oxley Act of 2002 (SOX) and the creation of the PCAOB was a direct result of the accounting fraud scandals of Enron and WorldCom, which resulted in major losses for investors and a precipitous decline in investor confidence in the U.S. capital markets. Therefore, the PCAOB was established to oversee auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audited financial statements. SOX require that any accounting firm that prepares or issues and audit report with respect to a U.S. public company must register with the PCAOB. The requirements of the Sarbanes-Oxley Act were intended to strengthen public companies’ internal controls over financial reporting and have served to sharpen the focus of senior management, boards of directors, audit committees, internal audit departments, and external auditors on their responsibilities for reliable financial reporting. Although the Board has no authority over public companies, PCAOB work has important implications for public companies and their audit committees.
Justify how the reporting requirements of the PCAOB reduce the chance of financial fraud. Historically, most major financial statement frauds have involved senior management, who are in a unique position to perpetrate fraud by overriding controls and acting in collusion with other employees. When fraud occurs at lower levels in an organization, individuals may not
A Practical Guide to the New PCAOB Reporting Requirements
Valerie D. Roseberry
Strayer University
Professor, Dr. Ahmad Abudiab
ACC 571 – Forensic Accounting
Sunday, February 03, 2013
A Practical Guide to the New PCAOB Reporting Requirements
The Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation that was established by Congress and placed under the jurisdiction of the Securities Exchange Commission. The Sarbanes-Oxley Act of 2002 (SOX) and the creation of the PCAOB was a direct result of the accounting fraud scandals of Enron and WorldCom, which resulted in major losses for investors and a precipitous decline in investor confidence in the U.S. capital markets. Therefore, the PCAOB was established to oversee auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audited financial statements. SOX require that any accounting firm that prepares or issues and audit report with respect to a U.S. public company must register with the PCAOB. The requirements of the Sarbanes-Oxley Act were intended to strengthen public companies’ internal controls over financial reporting and have served to sharpen the focus of senior management, boards of directors, audit committees, internal audit departments, and external auditors on their responsibilities for reliable financial reporting. Although the Board has no authority over public companies, PCAOB work has important implications for public companies and their audit committees.
Justify how the reporting requirements of the PCAOB reduce the chance of financial fraud. Historically, most major financial statement frauds have involved senior management, who are in a unique position to perpetrate fraud by overriding controls and acting in collusion with other employees. When fraud occurs at lower levels in an organization, individuals may not
References: ACC 571 Forensic Accounting Casepack. (2010). XanEdu Publishing, Inc., Strayer University—Virginia Beach ©2012 XanEdu Publishing, Inc. Davis, C., Ogilby, S., & Farrell, R. (2010). Survival of the analytically fit: The DNA of an effective forensic accountant. Journal of Accountancy, 210(2), 54-56. Kranacher, MJ, Riley, R., & Wells, J. (2011). Forensic Accounting and Fraud Examination. Hoboken, NJ: John Wiley & Sons. McNeal, A. (2010). What’s your fraud IQ? Journal of Accountancy, 209(5), 50-52. Michael Ramos (2003). Auditors’ Responsibility for Fraud Detection. SAS no. 99 introduces a new era in auditors’ requirements. http://www.journalofaccountancy.com/issues/2003/jan/auditorsresponsibilityforfrauddetection.htm Michele J. Hooper and Cynthia M. Pornelli (October 2010). Center for Audit Quality. Anti-Fraud Report, Deterring and Detecting Financial Reporting Fraud; A Platform for Action.601 13th Street, NW, Suite 800N, Washington, DC20005. www.TheCAQ.org Newman, R. (2009). Computer forensics fraud investigations. Journal of Forensic Studies in Accounting and Business, 1(1), 69-81. PCAOB (2003 – 2013). PCAOB OVERSEES, The Auditors of Companies to Protect Investors. © Copyright 2003 - 2013 Public Company Accounting Oversight Board. All Rights Reserved. http://pcaobus.org/Pages/default.aspx.