Public Accounting Firms:

Any Proprietorship, Partnership, Incorporated association, Corporation, Limited Liability Corporation, Limited Liability Partnership or other legal entity that is engaged in the public accounting or preparing or issuing audit reports is termed as public accounting firm. Any associated person of any of these entities comes under the category of public accounting firm.

Rules and Regulations:

  • The public accounting firms that audit public companies has to register with the board after paying the registration and annual fees.
  • The main function of the registered public accounting firm is to prepare the audit reports for the issuer according to the accepted standards of the board.
  • For the purpose of preparing or issuing an audit report or related work, the registered public accounting firm shall report directly to the audit committee.
  • As one of the purposes of this act is to avoid fraud in preparation of audit reports, any fraudulent activities done by the firm shall be imposed sanctions.
  • Any material written communications between the auditor and the senior management levels must be reported to the auditing committee.
  • Public accounting firms shall not perform any non-audit services to the issuer without the prior approval of the audit committee.
  • If the public accounting firms prepare audit for more than 100 issuers, the board shall inspect the firms every one year. For other firms the inspections will be conducted every 3 years.
  • The accounting firm must report to the audit committee if they use any critical accounting policies and practices. If the accounting firm uses any alternative treatments of financial information within GAAP, it has to be discussed with the management along with its effects. If the firm uses such alternative treatments in the corporate disclosure it must be reported to the audit committee.
  • If one of the top official of the issuer was an employee of a public accounting firm, and has participated in any capacity in the audit of the issuer during the one-year period prior to the audit initiation date, such firm shall not do any audit services to the issuer.
  • Any material correcting adjustments identified must reflect in the financial reports filed with the SEC. All material off balance sheet transactions and relationships that may have a material effect upon the financial status of an issuer will be required to be disclosed.

Foreign accounting firms:

Foreign accounting firms preparing and issuing audit reports of the U.S. should also follow the accepted standards of board and any audit report involving U.S. registrants is subject to the authority of the board.

Next:Public company Audit committee  

Home