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The PCAOB's role in audit conduct and conscience

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  • Keyser, John D.

Abstract

The mission of the Public Company Accounting Oversight Board (referred to herein as the PCAOB or the Board) is to protect investors and further the public interest. In this article, the regulatory approach of the PCAOB is contrasted with the Securities and Exchange Commission (SEC) in the context of the “capture” and “public interest” models of regulatory behavior. After the WorldCom fraud, Congress could have stripped the CPA profession of its auditing franchise, but it chose to take a less drastic measure. The independent public accountants retained their audit franchise, but with a new regulator to augment their conscience. The approach is consistent with the SEC strategy in that the auditor continues to fulfill an important role in the financial reporting supply chain. The article discusses the ways in which it appears that the drafters of SOX attempted to infuse the Board with the qualities that have made the SEC so successful. While SOX was prescriptive in many areas, it also imparted a significant degree of discretion to the Board. The article analyzes how the Board has used the discretion granted to it by SOX in ways that are either consistent or inconsistent with the SEC model. Although the PCAOB was structured very similarly to the SEC, the Board has exercised its discretion in ways that appear to deviate from the SEC strategy. The decision to name itself as the auditing standard-setter is an example of the departure from the SEC's own strategy.

Suggested Citation

  • Keyser, John D., 2015. "The PCAOB's role in audit conduct and conscience," Research in Accounting Regulation, Elsevier, vol. 27(2), pages 111-118.
    • Handle: RePEc:eee:reacre:v:27:y:2015:i:2:p:111-118
    DOI: 10.1016/j.racreg.2015.09.002
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    References listed on IDEAS

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    1. Flesher, Dale L. & Sharp, Andrew D., 2014. "Recalling the Public Oversight Board (1977–2002) and winners of the John J. McCloy Award," Research in Accounting Regulation, Elsevier, vol. 26(2), pages 204-211.
    2. Thomas K. McCraw, 1982. "With consent of the governed: SEC's formative years," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 1(3), pages 346-370.
    3. Gary J. Previts & Helen M. Roybark & Edward N. Coffman, 2003. "Keeping Watch! Recounting Twenty‐Five Years of the Office of Chief Accountant, U.S. Securities and Exchange Commission, 1976–2001," Abacus, Accounting Foundation, University of Sydney, vol. 39(2), pages 147-185, June.
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    Cited by:

    1. Dickins, Denise & Johnson-Snyder, Anna J. & Reisch, John T., 2018. "Selecting an auditor for Bradco using indicators of audit quality," Journal of Accounting Education, Elsevier, vol. 45(C), pages 32-44.
    2. Moehrle, Stephen R. & Franzen, Laurel & Meckfessel, Michele & Reynolds-Moehrle, Jennifer, 2016. "Developments in accounting regulation: A synthesis and annotated bibliography of evidence and commentary in the 2015 academic literature," Research in Accounting Regulation, Elsevier, vol. 28(2), pages 96-108.
    3. Sheu, Robert J., 2018. "An investigation about origins: A brief history of the PCAOB'S regulatory model," Research in Accounting Regulation, Elsevier, vol. 30(2), pages 159-165.

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