PCAOB and the Independence of the Auditors
The creation of the Public Company Accounting Oversight Board (PCAOB) is a significant and bold step towards dealing with rogue practices carried out by companies who liaise with auditors to put out false information to the public and thus gain from their deception in the end. The deception in the accounts has mostly been a corrupt practice that the management uses to swindle the company of its funds. Some of the auditors are usually compromised especially when they accept to be bought to deceive the public and the government in general.
The PCAOB tends to foster auditor independence to ensure that their judgments are not skewed towards the benefit of the enterprise. The longer the auditor company stays with a certain company, the less independent it becomes as the company may persuade auditors to side with it for their mutual benefit especially in altering financial accounts. As such, the body aims to adopt rotation among audit firms and thus ensure that no one firm stays with a company for longer periods. Such a move will help increase the independence of auditors. The PCAOB is yet to adopt the rotation of audit businesses and thus the independence of auditors yet to be achieved.
Most audit companies have been held as trustworthy by the government and general public especially in the various financial statements of companies that they audit, but the recent fraud cases like Enron have proven otherwise (Elder, 2010). Enron is one example of a company that swindled investors of their money. The company colluded with auditors together with other staff in the company to perpetrate the fraud that caused significant loss to the shareholders of the enterprise. As such, auditors have had little independence as some of them collude with part or the whole of management to swindle companies of millions of dollars that belong to investors (Church et al., 2014). The setting up of the PCAOB has ensured that the investors are protected from frauds perpetrated by the respective companies together with the auditors (Graham, 2010).
The members of the PCAOB are still divided on which method to choose in enhancing auditor independence. As such the more time they take to decide on what should be done, as the use of an audit committee in providing reports on skepticism and objectivity of the independent auditor, the independence of auditors is still far from being achieved. The implementation of either the audit committee or mandatory rotation of auditors will help improve on the independence of the auditors and thus provide a safe environment for investing. Therefore, the PCAOB needs to move fast, implement the measures on its table, and further help improves investor confidence and thus the security of their investments.
PCAOB Members and Investment Community
Not all investors may qualify for the positions of PCAOB especially in overseeing audit companies and the corporate environment. The people from the investment community may not have the necessary qualifications that will ensure the proper examination of businesses and any malpractices that they are engaged in. As such, it is important to note that the committee should have a person who is not from the investment community and the corporate to ensure that the reports are in no way deviated to suit one party (Gaynor et al., 2014). Also, the various members of the board should have a vast knowledge of issues related to the investment community and the stock exchange concerning audits and public corporations.
As such the investment community may not be well versed in, the various issues and practices associated with the stock exchange. Furthermore, the person to be appointed to the board should not only be conversant with auditing but should have a broad mindset that encompasses management of public corporations, various laws that govern the business community and audit companies among many others. Others investors may be skewed towards corruption in the company and may participate and hinder the proper functioning of the PCAOB in carrying out its mandate (Gunny & Zhang, 2013).
Therefore, the people on the board of PCAOB should have a proven record of accomplishment in the business field especially in dealing with the stock exchange together with the auditing firms. Such qualified persons can predict any pattern that may be used in swindling companies and thus put in measures that are going to prevent corrupt practices involving the organizations. Furthermore, the board can prepare the government and contribute to various laws that will help protect the investment community in the end. Also, they should have vast experience as a result and thus provide appropriate judgments on the many issues that will help rid the investment communities of swindling by corporations and further protect the investors. Therefore, it is better to have more qualified people in the business field than the individual investors who may not have the insight of looking at the various issues happening in the corporate world from a neutral point of view.
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