Audit Standard Setting and Inspection for U.S. Public Companies: A Critical Assessment and Recommendations for Fundamental Change

32 Pages Posted: 23 Nov 2008 Last revised: 3 Apr 2012

See all articles by Steven M. Glover

Steven M. Glover

Brigham Young University

Douglas F. Prawitt

Brigham Young University

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy

Date Written: January 28, 2009

Abstract

The Sarbanes-Oxley Act of 2002 (SOX) established the Public Company Accounting Oversight Board (PCAOB) to oversee the public accounting firms that audit publicly traded companies in the U.S. In this commentary we outline why we believe the PCAOB's audit standard setting and inspection models are inefficient and dysfunctional. We assert that the Board's ability to achieve its mission is limited by its early choices, together with its incentives, organizational composition, and structure. We support our assertions with a number of indicators of serious problems and flaws in the current approach. We also present high-level recommendations for change for policy makers, regulators, and leaders in the profession to consider in developing better approaches to audit standard setting, inspection, and enforcement.

Keywords: Auditing Standards Setting, Audit Inspection, PCAOB, Accounting Profession

JEL Classification: M41

Suggested Citation

Glover, Steven M. and Prawitt, Douglas F. and Taylor, Mark H., Audit Standard Setting and Inspection for U.S. Public Companies: A Critical Assessment and Recommendations for Fundamental Change (January 28, 2009). Accounting Horizons, June 2009, Available at SSRN: https://ssrn.com/abstract=1297525

Steven M. Glover

Brigham Young University ( email )

Provo, UT 84602
United States
801-422-6080 (Phone)
801-422-0621 (Fax)

Douglas F. Prawitt

Brigham Young University ( email )

Provo, UT 84602
United States
801-422-2351 (Phone)

Mark H. Taylor (Contact Author)

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy ( email )

4202 E. Fowler Avenue
Tampa, FL 33620
United States
(813) 974-6516 (Phone)

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