The Public Company Accounting Oversight Board (PCAOB) is charged with performing inspections of registered accounting firms. (Sarbanes-Oxley Act of 2002, Section 104) Basically, inspections are to “assess the degree of compliance. . . with the Act, the rules of the Board, the rules of the Commission, or professional standards. The inspection process has many aspects. Matters that have been discussed include timeliness of reports, extent of public disclosure of findings, qualifications of inspections, and the nature of the inspection process. Only the last identified matter, the nature of the inspection process, is the subject of this paper. After a review of the administrative structure for inspections, of the nature of the current inspection process, a tentative list of postulates is provided following by questions about the current process and a concluding summary. The review provides the following brief summary: 1, The current inspection strategy does not appear to reflect an assessment of the degree of compliance. The process, as reflected in inspection reports, is that of a consulting engagement that has its purpose to aid the entity reviewed in understanding where deficiencies are serious. The Board’s declaration that an inspection follows a “supervisory approach” seems related to consulting not compliance. 2. After more than five years of implementing the inspection process, the PCAOB has not established a clear, consistent model for inspections. Therefore, no generalizations about audit performance can be provided. 3. An objective, comprehensive assessment of the process in relation to what was needed at the time of the passage of the Sarbanes-Oxley Act of 2002 appears justified. That assessment must go beyond the inspection process itself, however. What is presented here is exploratory.
Newman, Bernard H. and Oliverio, Mary Ellen, "PCAOB Inspection Process: An Objective, Comprehensive Assessment is Justified" (2008). Faculty Working Papers. 64.