1. CReCER Meeting Managua
2012
Bruce Overton, Assistant Director
Office of International Affairs

2. 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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3. 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
 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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4. 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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5. Funding
 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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6. SEC Oversight
 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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7. PCAOB’S Principal Statutory Functions
 Registration
 Standard-Setting
 Inspections
 Investigations & Enforcement
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8. Registration
 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
 Registration subjects firms to PCAOB oversight
 Currently, approximately 2,400 audit firms (U.S. and
non-U.S.) are registered with the PCAOB
 Of those, approximately 900 are non-U.S. firms from 88
jurisdictions
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9. Current PCAOB Statistics
 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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10. Standard-Setting
 Previously controlled by the profession through
AICPA’s Auditing Standards Board (ASB)
 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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11. Inspections
 The Sarbanes-Oxley Act directs the Board to conduct a
continuing program of inspections
 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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12. Inspection Reports
 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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13. Enforcement and Investigations
 Separate process from Inspections
 Separate division
 Different staff
 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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14. Enforcement and Investigations
 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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15. Global Developments in Independent
Auditor Oversight
 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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16. Global Developments in Independent
Auditor Oversight
 Other countries:
 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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17. Global Developments in Independent
Auditor Oversight
 International Forum of Independent Audit Regulators
 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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