Securities and Exchange Commission Historical Society

Auditing the Auditors: Creating the Public Company Accounting Oversight Board


Introduction

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

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
A Measured Response?
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

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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