Law Commons^™

The Alchemy Of Effective Auditor Regulation, Sarah J. Williams

Faculty Scholarly Works

The audit profession has repeatedly failed in its obligation to accurately opine on financial statements prepared by companies that trade in U.S. markets. The list of entities that have contributed to the quest for effective regulation of these auditors is long; it includes the American Institute of Certified Public Accountants (AICPA), the U.S. Securities and Exchange Commission (SEC), Congress, outside directors of public companies, and the Public Company Accounting Oversight Board (PCAOB), a recent congressional creation. Yet, despite 50 years of effort, the formula for efficacious oversight of the audit profession remains elusive.

In 2020, then-president Donald Trump proposed to …

Avoiding Independent Agency Armageddon, Kent H. Barnett

Scholarly Works

In Free Enterprise Fund v. Public Company Accounting Oversight Board, the U.S. Supreme Court invalidated Congress’ use of two layers of tenure protection to shield Public Company Accounting Oversight Board (PCAOB) members from the President’s removal. The SEC could appoint and remove PCAOB members. An implied tenure-protection provision protected the SEC from the President’s at-will removal. And a statutory tenure-protection provision protected PCAOB members from the SEC’s at-will removal. The Court held that these “tiered” tenure protections unconstitutionally impinged upon the President’s removal power because they prevented the President from holding the SEC responsible for PCAOB’s actions in the same …

The Irrational Auditor And Irrational Liability, Adam C. Pritchard

Articles

This Article argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession …