PCAOB standards govern how registered public accounting firms conduct audits; U.S. GAAP governs how companies prepare financial statements; and SEC rules and securities laws govern public-company filings, disclosures, and related legal obligations. They work together in an issuer audit, but none is a substitute for the others.
What does each framework govern?
| Framework | Main subject | Who it principally affects | Practical question |
|---|---|---|---|
| PCAOB standards | Auditing and related professional work, including attestation, quality control, ethics, and independence standards. | Registered public accounting firms and associated persons. | How must the audit be planned, performed, documented, and reported? |
| SEC rules and federal securities laws | Issuer registration, filings, disclosures, and other securities-law obligations, including requirements affecting auditors. | Issuers, auditors, and other market participants subject to securities laws. | What must a registrant file or disclose, and what legal requirements apply? |
| U.S. GAAP | Financial accounting and reporting: recognition, measurement, presentation, and disclosure of items in financial statements. | Companies preparing financial statements and the users of those statements. | How should a transaction or balance be accounted for and presented? |
The PCAOB sets audit standards under the Sarbanes-Oxley Act and operates under SEC oversight. FASB is the private-sector accounting standard setter whose standards the SEC recognizes as generally accepted for federal securities-law purposes, subject to the Commission’s authority. The SEC and federal securities laws supply the public-company regulatory framework.
How do PCAOB standards differ from GAAP?
GAAP concerns the financial statements themselves: for example, how a company recognizes and presents an item. PCAOB standards concern the auditor’s professional work in examining those statements. GAAP does not tell the auditor how to plan or conduct an audit; applicable auditing standards do.
This distinction also separates GAAP from GAAS, a term associated with auditing standards. For issuer engagements governed by PCAOB rules, the SEC has said that historical references to GAAS in Commission rules, staff guidance, and federal securities laws should be understood as PCAOB standards plus applicable SEC rules. That interpretation does not turn GAAP into an audit standard.
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Are PCAOB standards the same as SEC rules?
No. PCAOB standards govern audit and related professional practice within the PCAOB’s remit. SEC rules and securities laws establish filing, disclosure, and other regulatory obligations for issuers and can also impose requirements affecting auditors. SEC oversight of the PCAOB does not make the two rulebooks interchangeable.
The SEC has also stated that PCAOB auditing-report standards do not supersede Commission rules or regulations. An auditor must therefore apply the relevant PCAOB standards and comply with applicable SEC requirements and securities laws.
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How do PCAOB, SEC, and FASB work together in a public-company audit?
- The company prepares its statements. It applies the relevant financial reporting framework, generally U.S. GAAP for a U.S. public company, along with applicable filing and disclosure requirements.
- The auditor evaluates and reports. A registered public accounting firm conducts its audit under applicable PCAOB standards, assessing whether the statements are presented under the applicable reporting framework.
- The regulatory framework continues to apply. The company and auditor must also observe applicable SEC rules and federal securities laws. PCAOB requirements do not displace those obligations.
The SEC’s 2003 policy statement recognized FASB’s financial accounting and reporting standards as generally accepted for purposes of federal securities laws, while preserving the Commission’s authority. The SEC’s 2004 interpretive guidance addressed issuer-related references to GAAS in Commission rules, staff guidance, and federal securities laws: those references should be understood as PCAOB standards plus applicable Commission rules.
Who sets accounting and auditing standards for public companies?
FASB sets financial accounting and reporting standards that the SEC recognizes for federal securities-law purposes, subject to its authority. The PCAOB sets standards for audits and related professional work by registered public accounting firms, under SEC oversight. The SEC administers securities-law requirements and retains authority over financial reporting for registrants.
Why check the effective date of a PCAOB standard?
PCAOB standards can change, and SEC approval is part of the oversight process. On August 20, 2024, the SEC announced approval of PCAOB AS 1000, General Responsibilities of the Auditor in Conducting an Audit, related amendments, and changes to a PCAOB contributory-liability rule. That dated announcement does not establish the status or effective dates of later amendments. For a live engagement or a current compliance question, consult the latest authoritative PCAOB standard text and applicable SEC materials rather than relying on an older summary.
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