The PCAOB and the Social Responsibility of the Independent Auditor

Beginning with Enron and culminating with Worldcom, a series of accounting scandals captured headlines and stimulated Congress to adopt the Sarbanes-Oxley Act of 2002 (the "Act"). The centerpiece of the Act was the creation of the PCAOB as a private-sector, nongovernmental body funded by the public companies and investment companies that benefit from independent audits. Unless these companies have paid a fee based on their relative market capitalization, they cannot obtain an auditor's opinion on their financial statements. Thus, the PCAOB is an independent body overseen by the Securities and Exchange Commission (SEC) that is neither government-sponsored nor taxpayer-funded. In short, the underlying mission of the PCAOB is to restore the confidence of investors, and society generally, in the independent auditors of public companies. There is no doubt that the repeated revelations of accounting scandals and audit failures that led to the creation of the PCAOB have seriously damaged public confidence.