One clear objective of the Sarbanes-Oxley Act was to create a board that would be responsible for administering the oversight of audits of publicly traded companies to protect the interests of the investing public. The oversight board was named the Public Company Accounting Oversight Board, more commonly called the PCAOB, and came into existence in October 2002. Funding of board activities is provided by support fees charged to each publicly traded company based on the size of its market capitalization. The board consists of five members appointed to a five-year term, and only two of the board members can be or can have been CPAs.

As part of its role, the PCAOB is responsible for registering and inspecting auditing firms performing audits of publicly traded companies. Auditing firms that audit 100 or more public companies are subject to annual inspections, and firms auditing less than 100 companies are subject to inspection every three years. The PCAOB is responsible for setting audit standards and quality control standards, ethics, maintaining independence, and other standards associated with preparing audit reports. In addition to conducting inspections of auditing firms, the PCAOB is also responsible for investigations, applying disciplinary procedures, and applying appropriate sanctions on auditing firms when necessary. Each firm registered with the PCAOB pays an annual fee that covers the cost of conducting its inspection. At the time of this writing, there were 1419 firms registered with the PCAOB and 42 firms waiting for approval.

The responsibility for setting audit standards...