What is PCAOB

"It is not enough to do your best; you must know what to do, and then do your best."

W. Edwards Deming, well known Quality Guru

The Public Company Accounting Oversight Board (PCAOB) is a private sector, non-profit corporation created by the Sarbanes-Oxley Act, to oversee the auditors of public companies. The purpose of the PCAOB is to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports. The PCAOB is set up as a private entity, but has several government-like regulatory functions, similar to the Securities and Exchange Commission (SEC) which is a Self Regulatory Organization (SRO) responsible for regulating the stock markets and other aspects of the financial markets in the United States. Section 101 of the Sarbanes-Oxley Act gives the PCAOB responsibility to:

• register public accounting firms;

• establish auditing, quality control, ethics, independence, and other standards relating to public company audits

• conduct inspections, investigations, and disciplinary proceedings of registered accounting firms

• enforce compliance with Sarbanes-Oxley

Along with these responsibilities to regulate audit-based services offered by audit firms, it is interesting to note that the PCAOB was also granted the authority to regulate non-audit services. Part of the PCAOB's power to set rules of the auditing industry include the power to regulate the non-audit services an audit firm provides to their clients. The PCAOB was given this authority in light of cases such as Enron and Worldcom, where auditors independence was compromised due to...