Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

Which standard applies to audits of public companies?

1. AICPA standards.

2. PCAOB standards.

3. ASB standards.

4. IAASB standards.

The correct answer is: PCAOB standards.

The auditing standards that apply to audits of public companies are established by the Public Company Accounting Oversight Board (PCAOB). This organization was created by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports. PCAOB standards include specific requirements and guidelines for auditors, ensuring their work meets the necessary quality and reliability expected by both investors and regulators in the public markets. In contrast, AICPA standards primarily govern audits conducted for private companies and are not suitable for public company audits, while the Auditing Standards Board (ASB) also sets standards for nonpublic entity audits. The International Auditing and Assurance Standards Board (IAASB) develops international standards that may be applied globally but they are generally not mandatory for U.S. public company audits, which must comply with PCAOB standards. Thus, PCAOB is the correct entity responsible for audit standards applicable to public companies.