The P.C.A.O.B. review of PwC
The Sarbanes-Oxley Act
On July 30th, 2002 the 107th Congress of the United States enacted public law 107-204, better known as the Sarbanes-Oxley act. This congressional action was in response to many unscrupulous acts by major corporations which caused investors to lose confidence in the capital markets. The major issues were caused by three main organizations, Enron, WorldCo, and Tyco. Enron, did not accurately record their debt obligations. They also recorded gains on internal sales amongst subsidiaries effectively overstating profits. WorldCom capitalized expenses that violated the Generally Accepted Accoutnign principles skewing creating inflated profits. Tyco’s fraud included providing unapproved loans to executives and then subsequently forgiving these debts without approval from the Board of Directors.
The PCAOB
Prior to the the enactment of the Sarbanes –Oxley Act the accoutning profession was operating in an era of self-governance. The audit standards had been set by the AICPA. Title I of the Satrbanes-Oxley Act established the Public Company Accounting Oversight Board. The PCAOB was created to “to oversee the audit of public companies that are subject to the securities laws, and related matters, in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports for companies the securities of which are sold to, and held by and for, public investors.” After the financial scandals of the early 2000s investor confidence had been shaken in the capital markets. The uncertainty in the relatibablity of information assurance provided by pubic audtirs casue the capital markets to grind to a halt. The establishment of the PCAOB siught to bring back this confidence by way of serving as the auditot of the auditors.
Inspections
Section 4 of