The Public Company Accounting Oversight Board (PCAOB) is a non-profit, private sector created under the 2002 United States Federal Law, called the Sarbanes - Oxley Act. The PCAOB was created to oversee and administer the auditors working for public companies. It aims to protect the investors' and the public's interest in the auditors' preparation of fair, informative, and independent auditors' reports.
Though considered a private entity, the PCAOB has many regulatory functions, like the functions of a government agency, making it similar to the Self Regulatory Organizations that are responsible for regulating the stock markets as well as the other aspects of the U.S. financial markets.
PCAOB Organizational Structure Overview
The PCAOB is composed of five members, including the chairman, each appointed by the Securities and Exchange Commission. Two PCAOB members must be a Certified Public Accountant (CPA). However, if one of those two members is the PCAOB chairman, he or she must have not practiced his/her CPA profession for the least 5 years prior to his/her appointment as the Chairman of the Board.
Each member of the PCAOB serves full-time during a five-year term. Currently, the annual salary of the chairman of the PCAOB is $556,000, while the other members of the board receive an annual salary of $452,000. The annual budget of the Board is approximately $100 million, but this budget must first be approved the SEC, before being funded by the U.S. issuers.
PCAOB Authority
Under the Sarbanes-Oxley Act Section 101, the PCAOB has the authority to:
* Register all public accounting firms that prepare and issue auditor's reports for issuers;
* Set quality control, auditing, independence, and other standards associated with the issuer's preparation of auditor's reports;
* Inspect registered pubic accounting firms;
* Investigate and conduct disciplinary proceedings and impose due sanctions to registered public accounting firms as well as to representatives of such firms;
* Penalize and issue fines of up to $2 million against registered audit firms and up to $100,000 against registered individual auditors;
* Perform other functions or duties as the SEC or the
* Board determines are appropriate or necessary to promote the high professional standards and to improve the overall quality of the auditing services offered by the registered public accounting firms as well as their employees;
* Complain and defend, sue and be sued, through its own counsel and in its own corporate name, with the SEC's approval, in any State, Federal, or other court;
* Perform its responsibilities, maintain its offices, and exercise all its powers and rights in all parts of the United States, regardless of any licensing, qualification, or other provisions of the municipal or State law;
* Hire accountants, staff, attorneys, as well as other agents as may be appropriate or necessary to the mission of the PCAOB;
* Assess, allocate, and collect support fees for the funding of the board; and
* Enter into binding contracts, incur liabilities, execute instruments, and conduct any other acts and things appropriate, necessary, or incidental to the completion and performance of its operations as well as the exercise of its authority under the provisions of the Sarbanes-Oxley Act.
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