The Public Company Accounting Oversight Board (PCAOB) oversees the audits of publicly-held companies, as well as brokers and dealers. The PCAOB does so by overseeing the qualifications and activities of the audit firms that engage in public company audits, and can impose discipline on these firms. By imposing a high level of discipline on auditors, it is thought that the PCAOB can minimize the risk of not finding material financial statement errors, thereby protecting investors.
The PCAOB was created in 2002 as part of the Sarbanes-Oxley Act, in response to a series of massive frauds in public companies, including Enron and WorldCom. The entity has a five-member managing board, which is appointed to staggered five-year terms. The PCAOB is organized as a nonprofit entity. The Securities and Exchange Commission is responsible for the activities of the PCAOB.
The PCAOB is funded by annual fees levied against public companies, based on their average monthly market capitalization. Funding also comes from brokers and dealers; these fees are assessed based on their average quarterly net capital.