Securities and Exchange Commission Historical Society

Auditing the Auditors: Creating the Public Company Accounting Oversight Board

Original PCAB Eight floor Reception Sign, from 2003 – 2019.
Original PCAOB headquarters reception sign, in place from 2003-2019.

Introduction

In 2002, the U.S. audit profession – hailed by the Supreme Court as serving a critical public watchdog function within the securities market (1) – was assigned its own watchdog by an anxious Congress reacting to several, high profile, corporate fraud and accounting scandals.

The Public Company Accounting Oversight Board (PCAOB) was established under the Sarbanes-Oxley Act of 2002 (SOX) to provide external and independent oversight over the auditors of publically traded companies. Prior to SOX, the audit profession had been self-regulated.

Independent oversight was more than 30 years in the making as a series of spectacular bankruptcies and substantially distorted public company financial statements sparked questions about auditors’ performance and independence (2). These failures began with the 1965 collapse of Westec, a Houston-based oil and mining company, accelerated during the dot-com bubble of the late 1990s, and exploded in the early 2000s with the meltdowns of Enron, WorldCom, and the accounting firm Arthur Andersen. These financial scandals raised the risk of, and in the worst cases produced, massive job and investor losses, triggering a cycle of litigation, congressional investigations, and commissions offering recommendations for audit reform.

During this period, the audit profession faced a host of competing pressures, including a changing business landscape that emphasized short-term earnings over long-term growth and the rise of lucrative consulting services within traditional audit firms’ less remunerative audit practices. (3)

Responding to calls from Wall Street and Main Street to restore investor confidence, Congress passed the Sarbanes-Oxley Act, laying out the foundations for the PCAOB in a mere 65 pages. This gallery tells the story of how early Board members and staff used the statute to build the regulator from scratch, creating registration, inspection, enforcement and standard-setting programs without models or prototypes. As well, this gallery traces the challenges the PCAOB faced as it forged its path onto the domestic and international financial regulatory landscape.


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Footnotes:

(1) United States v. Arthur Young, 465 U.S. 805, 818 (1984)

(2) Stephen A. Zeff, “How the U.S. Accounting Profession Got Where It is Today: Part 1,” Accounting Horizons, September 2003, p. 196.

(3) Ibid.

Related Museum Resources

Galleries

Wrestling with Reform
The Richard C. Adkerson Gallery on the SEC Role in Accounting Standards Setting

Photos

October 5, 2011

Robert Kueppers and Mark Peecher

July 30, 2012

The Sarbanes-Oxley Act: The First Decade

July 30, 2012

The Sarbanes-Oxley Act: The First Decade

July 30, 2012

The Sarbanes-Oxley Act: The First Decade

July 30, 2012
October 16, 2012

Deloitte Fireside Chat VII: The Profession Looks at Sarbanes-Oxley

November 15, 2012
November 15, 2012
November 15, 2012

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November 15, 2012
October 10, 2013

Deloitte Fireside Chat IX: The FASB at Forty and Forward

October 10, 2013

Deloitte Fireside Chat IX: The FASB at Forty and Forward

Programs

March 2, 2021

Standing Up the PCAOB: A Discussion with PCAOB's Founding Board Members and Audit Profession

Presenter(s): On March 2, the Society hosted a live broadcast on the early history of the PCAOB. Four founding PCAOB board members provided a first-hand understanding of the challenges and opportunities they faced in standing up a new regulatory entity required under the Sarbanes Oxley Act; and leaders of the auditing profession during early implementation of Act discussed the issues their firms and the profession as a whole faced in transitioning to a new regulatory regime. This program and related gallery on the PCAOB are made possible through the generous support of the Center for Audit Quality and its member firms, including: BDO USA, Crowe LLP, Deloitte & Touche LLP, EY, Grant Thornton LLP, KPMG LLP, PwC, RSM US LLP

15 November 2017

Deloitte Fireside Chat XIII: Evolving Role of the Auditor

Moderator: Moderator Tom Davenport, Professor, Babson College

Presenter(s): Dan Sunderland, Chief Auditor, Deloitte & Touche LLP and Will Bible, Partner, Deloitte & Touche LLP

16 April 2015

COSO at Thirty Years

Moderator: Mark Beasley

Presenter(s): David Landsittel, Larry Rittenberg, Richard Steinberg

Made possible through the support of the Committee of Sponsoring Organizations of the Treadway Commission

08 October 2014

Deloitte Fireside Chat X: Financial Reporting - Past, Present and Future

Moderator: Mark Peecher

Presenter(s): J. Michael Cook, Joseph Ucuzoglu

05 June 2014

Corporate Governance in the New Century (Fifteenth Annual Meeting)

Moderator: Kenneth Durr

Presenter(s): Jill Fisch, Cynthia Fornelli, Keith Higgins, John Olson, Ann Yerger

10 October 2013

Deloitte Fireside Chat IX: The FASB at Forty and Forward

Moderator: Parveen Gupta

Presenter(s): Russell Golden, Joseph Ucuzoglu

15 November 2012

A Measured Response?

Moderator: Robert K.D. Colby

Presenter(s): Daniel Goelzer, Peggy Peterson, Dean Shahinian, Linda Chatman Thomsen

16 October 2012

Deloitte Fireside Chat VII: The Profession Looks at Sarbanes-Oxley

Moderator: Mark Peecher

Presenter(s): Alan Beller, Joseph Ucuzoglu

30 July 2012

The Sarbanes-Oxley Act: The First Decade

Moderator: Mark Beasley

Presenter(s): Michael Oxley, Paul Sarbanes

Made possible through the support of the Center for Audit Quality

07 June 2012

A Creative Irritant: The Relationship between the SEC and Accounting Standard Setters (Thirteenth Annual Meeting)

Moderator: George Fritz

Presenter(s): Dennis Beresford, Edmund Jenkins, A. Clarence Sampson

18 October 2011

Deloitte Fireside Chat VI: The SEC's Role in Accounting Standards Setting

Moderator: Mark Beasley

Presenter(s): Loretta Cangialosi, Robert Kueppers, Arthur Wyatt

05 October 2011

Deloitte Fireside Chat V. Role of the Auditor

Moderator: Mark Peecher

Presenter(s): Robert Kueppers, Robert Moritz

26 October 2010

Deloitte Fireside Chat IV: Responsibility for Preventing and Detecting Financial Reporting Fraud

Moderator: Ira Solomon

Presenter(s): Joseph Carcello, Cynthia Fornelli, Robert J. Kueppers

14 October 2010

Deloitte Fireside Chat III: Regulation in the Audit Profession: Yesterday, Today and Tomorrow

Moderator: G. Peter Wilson

Presenter(s): Roderick Hills and Robert Kueppers

28 October 2009

Deloitte Fireside Chat II: Exploring Principles vs. Rules-Based Accounting and Auditing Standards

Moderator: Patricia Fairfield

Presenter(s): Robert Kueppers, Scott Taub

22 October 2009

Deloitte Fireside Chat I: The Role of Professional Judgment in Accounting and Auditing

Moderator: Zoe-Vonna Palmrose

Presenter(s): Gregory J. Jonas, Robert Kueppers

06 June 2006

Who's Counting? - The Critical Role of Financial Reporting in the Capital Markets (Seventh Annual Meeting)

Moderator: Robert Kueppers

Presenter(s): Pat McConnell, Donald Nicolaisen, Aulana Peters, Lawrence Salva, Scott Taub

21 September 2004

Fireside Chat - Forensic Accounting

Moderator: Donald Langevoort

Presenter(s): James Barratt, Ernest Ten Eyck

Film, Radio And Television

1996

"First Century of the CPA"

courtesy of the American Institute of Certified Public Accountants

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