PCAOB Auditing Standards

Also known as: PCAOB AS

framework · accounting · regulatory-standard

Public Company Accounting Oversight Board's auditing standards governing audits of US public companies, established by Sarbanes-Oxley.

PCAOB Auditing Standards govern audits of US public companies (SEC issuers) and are issued by the Public Company Accounting Oversight Board, a nonprofit corporation established by the Sarbanes-Oxley Act of 2002 in response to Enron, WorldCom, and related accounting scandals. The PCAOB initially adopted the AICPA GAAS standards in force as of April 16, 2003 as 'interim' standards, then began issuing its own Auditing Standards (AS 1-3001 in the current numbering, reorganized in 2015) to replace the interim guidance. Distinctive PCAOB requirements include the integrated audit of internal control over financial reporting (AS 2201, Sarbanes-Oxley Section 404), critical audit matters in the auditor's report (AS 3101, effective 2019), and PCAOB inspection of registered audit firms. PCAOB inspections produce public reports on identified deficiencies, and the SEC has enforcement authority for PCAOB violations.

Originators

Public Company Accounting Oversight Board (created by Sarbanes-Oxley Act of 2002); interim adoption of pre-2003 GAAS high

Year / Decade

2002 (PCAOB created); 2003 (interim standards adopted); 2004 onward (PCAOB-issued AS) high

Primary sources

Sarbanes-Oxley Act of 2002 (PL 107-204), PCAOB. Auditing Standards (continuously updated), PCAOB (2007). Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements, PCAOB (2017). Auditing Standard No. 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion high

Core components

AS 1000 series — General auditing standards
AS 2000 series — Audit procedures (risk assessment, evidence, ICFR)
AS 2201 — Audit of Internal Control over Financial Reporting (SOX 404)
AS 3101 — The Auditor's Report on Audited Financial Statements (including CAMs)
Quality control and engagement quality review requirements
PCAOB inspection program with public Part I and confidential Part II findings
Coordination with SEC enforcement
Specific independence rules under PCAOB Rule 3520 series

Primary use case

Audits of all SEC issuers (US public companies, foreign private issuers, broker-dealers); basis for the integrated financial-statement and ICFR audit opinion required for accelerated filers; reference framework for PCAOB inspections of registered audit firms; input to SEC enforcement, audit-committee oversight, and investor analysis.

Common criticisms

PCAOB inspection findings have remained persistently high (typically 20-40% of inspected engagements with significant deficiencies) for two decades, raising questions about whether the inspection regime improves audit quality or merely documents persistent failure (see DeFond and Lennox 2017 review)
critical audit matters (CAMs) under AS 3101 have been criticized as adding length without improving information content (early empirical studies showed limited investor reaction)
cross-border inspection access has been a chronic problem, particularly with China — the Holding Foreign Companies Accountable Act of 2020 and 2022 PCAOB-China agreement responded to long-standing access denial
the integrated ICFR audit (AS 2201) was criticized in its early years (AS 2 era, 2004-2007) as producing disproportionate compliance cost relative to benefit, prompting the shift to AS 5 (2007) and ongoing debate about ICFR materiality
the Free Enterprise Fund v. PCAOB (2010) Supreme Court decision found PCAOB's structure partially unconstitutional, requiring statutory severance of for-cause removal protections
the SEC's appointment power and recent leadership transitions have produced political-cycle volatility in PCAOB priorities.

Lineage

Siblings: GAAS, ISA, Yellow Book
Derived from: Sarbanes-Oxley