The Sarbanes-Oxley Act of 2002 requires the Public Company Accounting Oversight Board ("PCAOB") to conduct an annual inspection of each registered public accounting firm that regularly provides audit reports for more than 100 issuers. A Board inspection includes, among other things, a review of selected audits of financial statements and of internal control over financial reporting. If the Board inspection team identifies deficiencies in those audits, it alerts the firm to the deficiencies during the inspection process. Deficiencies that exceed a certain significance threshold are also summarized in the public portion of the Board’s inspection report. The Board encourages readers to bear in mind two points concerning those reported deficiencies.
July 24, 2007 – Washington, DC, USA | Sources: PCAOB
As of July 24, 2007, 1799 accounting firms were registered with the Board. This total includes the 9 firms that have applied to be withdrawn from the registration withdrawals.
Section 102 of the Sarbanes–Oxley Act of 2002 ("the Act") prohibits accounting firms that are not registered with the Board from preparing or issuing audit reports on U.S. public companies and from participating in such audits.
Section 106(a) of the Act provides that any non–U.S. public accounting firm that prepares or furnishes an audit report with respect to any U.S. public company is subject to the Board’s rules to the same extent as a U.S. public accounting firm. Section 106(a) further authorizes the Board to require that non–U.S. public accounting firms that do not issue such reports, but that play a substantial role in the preparation of the audit reports, register.
"Currently, there is diversity in the way the shortcut method is applied by preparers of financial statements. That diversity has resulted in differences in financial statement information for similar transactions. This proposal seeks to reduce that diversity," said Louis Fanzini, FASB financial services industry fellow. "This proposal also is designed to reduce complexity in a way that makes it easier for preparers to understand the application of the shortcut method, resulting in clearer financial statements for the investor."