Various groups (the PCAOB, the SEC, the AICPA, the IAASB, COSO, FASB, and IASB,
ID: 2789915 • Letter: V
Question
Various groups (the PCAOB, the SEC, the AICPA, the IAASB, COSO, FASB, and IASB, not to mention state boards of accountancy and the courts) have vested interests in oversight and governance of the accounting profession.
Please respond to all of the following prompts in one combined main response:
Describe the unique role each group plays with respect to the audit standard-setting process. Are all the groups really necessary?
Are there redundancies in oversight or governance? From an auditor’s perspective, which group is the most important? Why?
How do these groups contribute to the maintenance of professional quality?
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Explanation / Answer
Role of PCAOB: The role of PCAOB (Public Company Accounting Oversight Board) is to protect the interests of the investors in public companies by overseeing their audits and to provide accurate and independent audit reports. They also aim at reducing auditing failures and promote trust in the auditing process.
Role of SEC: The role of SEC (Securities Exchange Commission) is to maintain an efficient market environment such that the investors’ rights are protected and they have trust and faith on the market.
Role of AICPA: The American Institute of Certified Public Accountants has the aim of preparing public accountants who are ethical in nature and follow the auditing and accounting standards for the U.S. public and private companies as well as for the governments. They should be unbiased and impartial in their duties as an accountant.
Role of IAASB: The role of the International Auditing and Assurance Standards Board is to ensure that uniform rules and regulations are followed in the companies all around the world. They protect the interests of the investors by taking care of the quality of audits and reviewing them.
Role of COSO: The Committee of Sponsoring Organizations of the Treadway Commission works towards creating a model for evaluation of the internal controls of a company. They aim to guide the companies on enterprise risk management and identification of frauds in order to improve the performance of the companies.
Role of FASB and IASB: The Financial Accounting Standards Board and the International Accounting Standards Board are aiming to work towards creating financial accounting and reporting standards such that the investors will have a clear picture of the financial condition of a company from its financial statements.
I believe that all the above mentioned groups are necessary as they are all working for protecting the investors’ rights from different perspectives. For example, COSO looks into the enterprise risk management and internal controls while SEC looks into the stocks markets. Thus, though they all have the common goal of protecting the investors’ rights it is from different areas.
Are there redundancies in oversight or governance? From an auditor’s perspective, which group is the most important? Why?
No, there are no redundancies in oversight or governance. The goal is to maintain transparency in the financial statements of the company and prevent any frauds. But the way of achieving this goal is different for each of the above mentioned bodies.
From an auditor’s perspective, the most important group is International Auditing and Assurance Standards Board as it ensures that the quality of the audits is the same throughout the world and there is a consistency maintained in the audits.
How do these groups contribute to the maintenance of professional quality?
The above mentioned groups contribute to maintenance of professional quality by frequent reviews and quality checks. Since these groups are mostly regulatory bodies, so companies, accountants and auditors will have to abide by the rules and regulations set by them.
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