Presentation on theme: "The Role of Research at the PCAOB"— Presentation transcript:
1 The Role of Research at the PCAOB Gary HolstrumAssociate Chief Auditor andDirector of Research, PCAOBAuditing Section Doctoral ConsortiumJanuary 12, 2006
2 CaveatThe views I express are my own personal views and not necessarily those of the PCAOB or of the Office of the Chief Auditor.
3 Career Influences: Personal Experiences PhD background (Iowa) & first teaching position (U of Texas)Transition to auditing research(U of Florida)Late 1970sCongressional scrutiny of professionPressure to increase research input into standards-setting processConsideration of AICPA Director of Research positionPartnership at DeloitteAuditing Standards BoardResearch input re: ConfirmationsInternational Accounting Education Standards BoardPCAOB
4 Potential role of research in standards-setting process The potential impact of researchInherent limitationsSignificant increase in auditing research in the last yearsDifficulty that standards-setters have in identifying relevant research, evaluating its validity, and synthesizing its significanceSolution: Have standards-setters work with academic researchers to develop synthesis of research that is relevant to each major standards-setting project
5 2006 Proposed Standards-Setting Activities Auditor Risk Assessments*Audits of Fair Value*(*Research teams formed in early 2005Engagement Quality ReviewCommunications with Audit CommitteesAudit Firm Quality ControlFinancial FraudAudit ConfirmationsAuditing Related Party TransactionsAudit Reporting Model
6 Research Input to PCAOB Standards-Setting Projects Auditing Section of the American Accounting AssociationCreated teams of researchers to prepare a synthesis of existing researchFor all major PCAOB Standards-Setting ProjectsUnprecedented level of relevant, usable research inputSeven new teams formed (Early November 2005)Two research teams formed earlierRisk assessment team has completed synthesisAudits-of-fair-value team is in process of completing its synthesis
7 Research Synthesis Teams for PCAOB Standards Projects Auditor Risk Assessments*Audits of Fair Value*(*Research teams formed in early 2005Engagement Quality ReviewCommunications with Audit CommitteesAudit Firm Quality ControlFinancial FraudAudit ConfirmationsAuditing Related Party TransactionsAudit Reporting Model
8 Information about Research Synthesis Teams Presentations by Auditor Risk Assessments Team and Audits of Fair Value Team at 1:30 p.m. Saturday, January 14PCAOB Briefing Papers on all nine projects are available on PCAOB Web Site (www.pcaobus.org)Under Standing Advisory Group--For various SAG meeting datesAlso hyperlinked via Auditing Section web site:PCAOB Standards-Setting Update articles in each recent issue of The Auditor’s ReportAnnouncement for PCAOB Research Teams
9 Opportunities for Current Accounting Doctoral Students Related to current research synthesis projectsRelated to anticipated future research synthesis projectsOther research opportunities (in critically important areas)
10 Other Research Opportunities: Cost-benefit analyses Need for more cost-benefit research with more valid measures of the benefits related to SOX, 404, PCAOB Auditing Standard #2, and other PCAOB activitiesMedia filled with cost dataVery little research data on the real benefits to investors and the public interestNeed to measure the cost of fraudulent financial reporting to investors and the public interestEstimating the likelihood of a decreased incidence of fraudulent financial reporting or materially misstated financial informationNeed for synthesis of valid cost-benefit research
11 Conclusion: PCAOB MISSION To oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.
12 Bottom Line: Standards-Setters Need Your Help as Researchers
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