Document Type

Article

Publication Date

2014

Keywords

Audit quality oversight, PCAOB inspection, risk-based selection

Disciplines

Accounting

Abstract

As a result of massive financial statement frauds at Enron, WorldCom, Tyco, Sunbeam, Waste Management, Xerox and others, the US Congress enacted the Sarbanes Oxley Act of 2002 (SOX 2002). This Act set up the Public Company Accounting Oversight Board (PCAOB) which regulates the auditing profession in the US. The PCAOB issues auditing standards, inspects audit quality and also has enforcement powers. Following the US lead, nations such as Australia, Canada, and the United Kingdom have set up national statutory bodies to monitor audit quality.

This paper summarizes the work of these national bodies and synthesizes recent reports of these organizations concerning audit quality. Important lessons gleaned from this synthesis can be useful for those charged with audit regulation in India and elsewhere. For example, auditor regulation in India is in its nascent stage. In August 2013, the Companies Act of 2013 established the National Financial Reporting Authority (NFRA). NFRA is tasked with the monitoring of audits of public company financial statements in India, among other mandates. This paper discusses the draft rules for auditor oversight developed by NFRA and provides some suggestions as to how countries beginning to develop audit quality inspection procedures can benefit from the prior experiences of others.

Publication Title

Indian Accounting Review

Volume

18

Issue

1

First Page

1

Last Page

14

ISSN

0972-1754

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