The oversight of the audit profession

Seminar paper from the year 2007 in the subject Business economics - Miscellaneous, grade: 1,0, University of Glamorgan (Business School), course: International Accounting & Audit, language: English, abstract: This paper provides an overview of the current regulatory frameworks for financial reporting

and auditing in the UK, US and Germany. During the last years these frameworks were

noticeably changed. These changes arose especially from political interest in accounting

regulation following the Enron collapse. The main change in the US was the introduction of

the Sarbanes-Oxley Act containing strict regulations for auditors, including their

responsibilities and services. It also contains a list of prohibited audit activities, the so-called

¿non-audit¿ services. The main feature of the Act was the creation of an oversight board to

regulate and control auditors of public companies. Thus the ¿Public Company Accounting

Oversight Board¿ was established. The PCAOB is a private-sector non-profit overseer,

supervised by the US Securities Exchange Commission (SEC) which regulates basically

anything related to the securities market.

Following the collapse of Enron and the turbulence in the UK markets that followed, a review

of financial regulation in the UK was ordered, covering for example auditor independence,

corporate governance, financial reporting and auditing standards and accountability of audit

firms. In order to restore credibility in UK accounting the Financial Reporting Council (FRC),

an independent private sector body funded by the accountancy profession, was set up. The

FRC has several subsidiary bodies, including the Professional Oversight Board (POB)

providing independent oversight of the regulation of the auditing profession.

The German Auditor Oversight Commission (AOC) was established according to the Auditor

Oversight Law. It is in charge of the public oversight of all activities of the German Chamber

of Public Accountants (WPK) with respect to statutory auditors. The Commission has the

ultimate responsibility in the areas of licensing, registration, disciplinary investigations and

quality assurance, all with respect to members of WPK entitled to provide statutory audit

services (WPK, n.d.).

It is argued that these new regulations impose another layer of bureaucracy with significant

costs for very little apparent gain. But ethical issues surrounding the public¿s perception of

auditor performance need to be addressed, not just for the sake of the profession, but for the

efficiency and effectiveness of capital markets in general (Malthus and Scoble, 2005).