Sarbanes-Oxley Implementation

Giving SOX and Fraud Examiners Genuine Clout: An interview with PCAOB chief auditor Douglas R. Carmichael

 


An interview with PCAOB chief auditor Douglas R. Carmichael 

Douglas R. Carmichael, Ph.D., CFE, CPA, chief auditor of the Public Company Accounting Oversight Board, has the tough task of guiding the standards-setting procedures of the Sarbanes-Oxley Act while balancing the interests of diverse groups. This CFE is ready for the challenge.

The economic pendulum swings widely in the United States. From the promise of riches and unbridled greed of the ’90s to the bursting bubbles and shocked austerity of the ’00s – the country has seen the extremes. When monolithic corporations crumbled due to fraud and average citizens lost jobs and pensions, Congress stepped into the gap and created the Sarbanes-Oxley Act (SOX) of 2002.

The lawmakers’ outrage spawned the far-reaching Act but now it’s time for the new Public Company Accounting Oversight Board (PCAOB) to clarify and implement. The Act established the PCAOB as a private-sector, non-profit corporation to oversee the auditors of public companies to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.

Fraud Magazine recently spoke to Douglas R. Carmichael, a Certified Fraud Examiner, and the first chief auditor and director of professional standards of the PCAOB, about his efforts to implement SOX.

Dr. Carmichael has the task of guiding the standards-setting process while balancing the concerns of investors, general public, auditors, fraud examiners, corporations, the Securities and Exchange Commission (SEC), and Congress. On March 9, the PCAOB approved the important standard, “An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statement.” Section 404(a) of SOX and the SEC’s related implementation rules require the management of a public company to assess the effectiveness of the company’s internal control over financial reporting. Section 404(b) of the Act, as well as Section 103, directed the PCAOB to establish professional standards governing the independent auditor’s attestation, and reporting, on management’s assessment of the effectiveness of internal control.

The new standard requires auditors to review management’s assessment of corporate controls, run their own tests of those controls, and, among other requirements, judge the effectiveness of corporate board members who sit on a firm’s audit committee. As of publication time, the SEC still had to approve the rule. (The text of the auditing standard and related appendices are at www.pcaobus.org under “Rulemaking.”)

Dr. Carmichael comes to the job as an experienced practitioner, consultant, author, and academician with a desire to serve. He will be one of the keynote speakers at the 15th Annual ACFE Fraud Conference & Exhibition. (See page 43.)

Dr. Carmichael answered our questions in his new office at the PCAOB in Washington, D.C. (Dr. Carmichael’s views are his own and don’t necessarily reflect the views of the PCAOB Board or other members of the staff.)


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