IAASB and PCAOB Standards
The International Auditing and Assurance Standards Board (IAASB) was founded in March 1978. It was previously known as the International Auditing Practices Committee (IAPC). The IAASB is an independent standard-setting body that serves the public interest by setting international standards for auditing, quality control, review, other assurance, and related services, and by facilitating the convergence of international and national standards. In doing so, the IAASB seeks to enhance the quality and uniformity of practice throughout the world and strengthens public confidence in the global auditing and assurance profession.
The IAASB follows a rigorous due diligence process in developing its pronouncements. Input is obtained from a wide range of stakeholders including the IAASB's Consultative Advisory Group (CAG) national auditing standard setters, International Federation of Accountants (IFAC) member bodies and their members, regulatory and oversight bodies, firms, governmental agencies, investors, preparers, and the general public. Exposure drafts of proposed pronouncements are posted on the website and comments are invited; final pronouncements are accompanied by a Basis for Conclusions with respect to comments received.
The Public Interest Oversight Board (PIOB) oversees the work of the IAASB and its CAG to ensure that the activities of the IAASB follow due process and are responsive to the public interest.
The CAG comprises a diverse mix of 32 Member Organizations including user groups, regulators, financial executives, international public interest organizations and other professional bodies such as lawyers, valuation experts and actuaries with interests in, or related to audit and assurance. The CAG is an integral and important part of the IAASB's formal process of consultation, and representatives of CAG member organizations provide the IAASB advice on numerous areas, including the IAASB’s agenda and project timetable; its technical projects; and other matters of relevance to the IAASB’s activities.
The IAASB’s strategy addresses the following three main themes in the public interest:
- Supporting global financial stability;
- Enhancing the role, relevance and quality of assurance and related services in an evolving world;
- Facilitating adoption and implementation of the standards.
Financial and accounting scandals in the early 2000s prompted a number of regulatory reform initiatives, one of which was to establish independent external oversight of the public company auditing profession. The Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports. The PCAOB, which was created by the Sarbanes-Oxley Act of 2002, also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection. Sarbanes-Oxley required that auditors of U.S. public companies be subject to external and independent oversight for the first time. Previously, the profession was self-regulated.
The Securities and Exchange Commission (SEC) has oversight authority over the PCAOB, including the approval of the Board's rules, standards, and budget.
The Dodd-Frank Wall Street Reform and Consumer Protection Actor 2010 amended Sarbanes-Oxley and established funding for PCAOB activities, primarily through annual accounting support fees. These fees are assessed on public companies, based on their relative average monthly market capitalization, and on broker-dealers, based on their relative average quarterly tentative net capital.