Answer to questions about Public Company Accounting Oversight Board Research Paper - 1

Answer to questions about Public Company Accounting Oversight Board (PCAOB) - Research Paper Example ic limited organizations (primarily Enron and WorldCom and the collapse of Arthur Anderson), the Congress felt that there was a need for strict auditory regulations and monitoring. Therefore, to restore the investor confidence in public firms’ auditing and financial reporting, the PCAOB was established (Goelzer). I believe one of the key factors of the AICPA was that of self-regulation by those in the accounting profession. This is one of the reasons behind the substantial loss in standardization and therefore to create a level playing field for all public companies it was important to create a separate entity that solely looked into auditing control measures and ensured that the precedent set by Enron and WorldCom and many others was not repeated (Goelzer). Public organizations ought to maximize the interest of the public and therefore it became that a separate legal entity was established for their auditory regulation, as opposed to the AICPA which oversaw the accounting and auditing practices of non-profit organizations (American Institute of Certified Public Accountants). The PCAOB was created because the roles and responsibilities of auditors in public companies were broadening. Audit firms were increasingly providing consultancy services and the work of the auditors was directly tied to the cost incurred by them. Therefore, the pressure to carry out auditing cost effectively increased on auditors which resulted in them not investigating matters on which they had slight doubts for fear of â€Å"wasting† the money if it turned out that there was no fraud. Consequently, the PCAOB restricted the advisory services provided by auditing firms. Moreover, the PCAOB could set auditing standards for public companies. It separated the auditors from the management of the company, the self-regulated function of accounting was now taken over by the PCAOB and the management and the auditors were both legally obliged to report the company’s internal control and financial