There are three key elements of the self-regulatory program for certified public accountant firms: (1) peer review for the firm's quality control system once every three years, (2) inquiries to determine whether alleged audit failures indicate breakdowns in a firm's quality control system, and (3) oversight of the process by the Public Oversight Board.
The self-regulatory process answers to legislators, regulators, and the general public. Over-sight of the process, by the Public Oversight Board and the Security and Exchange Commission, makes the section's self-regulatory system both more effective and more credible.
The Public Oversight Board
In 1977, the AICPA created the Public Oversight Board. The board is an independent, private-sector body that monitors and reports on the accounting profession's self-regulatory programs for independent auditors of entities registered with the Securities and Exchange Commission. The board recommends improvements to strengthen the system.
The board's independence is evidenced by its power to select the successors of its members, hire and compensate its staff, set the compensation of its members, and choose its chair. The board consists of five members, primarily nonaccountants, who represent a broad spectrum of business, professional, regulatory, and legislative experience. The board, which meets about eight times a year, had its first meeting in March 1978.
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