The Proposed Absorption of PCAOB by SEC
Trump’s administration intends to merge the Public Company Accounting Oversight Board (PCAOB) with the Securities Exchange Commission (SEC), citing duplication of tasks and increased costs. Ironically, the absorption of PCAOB into SEC would still escalate the labor costs, as the institution lacks the technical expertise to conduct audit oversight. Moreover, it would reduce investors’ trust since the PCAOB is an independent board that oversees auditors’ activities. In determining the vitality of the PCAOB in both the auditing and accounting industry, it is essential to explore its background. The PCAOB was established by the Sarbanes-Oxley Act of 2002 in the wake of accounting scandals surfacing during the dot com bubble. The companies involved included WorldCom and Tyco. Interestingly, Arthur Anderson, a venerated auditing firm, also collapsed during the period. This institution was set up to establish audit report standards. It proscribes accounting companies from commercial engagement with firms they audit. Nonetheless, they are allowed tax consultancy in these firms. Since its establishment, investors have not complained, nor have they requested its closure. This indicates that the institution effectively serves investors’ interests.
Most importantly, the board facilitates the presentation of reliable and verifiable financial reports which form the basis of financial markets. Investors need to accurately discern the actual performance of both firms and the industry before investing. In my perspective, I can’t entirely agree with the proposal of SEC absorbing PCAOB. This institution incentivizes auditors and accountants to engage in ethical auditing practices and, at the same time, enhances the accuracy of their reports. It fortifies investors’ trust and encourages them to invest in the financial market due to the availability of accurate financial statements. Therefore, the benefit of the PCAOB in the financial industry is more significant than its costs, and it should thus be maintained to promote a healthy sector.
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The Proposed Absorption of PCAOB by SEC
In February the White House made a proposal to have the Public Company Accounting Oversight Board
The Proposed Absorption of PCAOB by SEC
(PCAOB) that was created by the Sarbanes-Oxley Act to be absorbed into the SEC to save on costs. Arthur Levitt, a famous prior Chairman of the SEC during the time of the Enron crisis disagrees. Read his Opinion Article in the WSJ Without an Independent Watchdog, Who Will Audit the Auditors?
(Links to an external site.)https://www.becker.com/
Instructions: Read through the above two articles and comment on your agreement or disagreement of this proposal. There is no required length here. I just want you to be exposed to this issue which if enacted will affect many of your accounting careers.
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