PCAOB Inspections: A First Peek

The Sarbanes-Oxley Act of 2002 requires the PCAOB to conduct a program of inspections for firms auditing SEC registrants. In mid-2003 the PCAOB commenced voluntary, limited inspections of the Big Four accounting firms. The reports of these limited inspections were issued in August 2004. The purpose of this paper is to describe the PCAOB inspection process and the results of the first "limited" inspections of the four largest accounting firms. The paper reviews inspection provisions of the Act and related rules of the PCAOB. The seven areas of inspection are introduced, and procedures performed related to each area are presented. We discuss inspection findings and the published reactions of the inspected firms. This paper comments on the observed tone of both the inspection reports and the firms' responses.