The PCAOB also oversees the audits of broker-dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection.

Congress vested the PCAOB with expanded oversight authority over the audits of brokers and dealers registered with the SEC in 2010 through the Dodd–Frank Wall Street Reform and Consumer Protection Act.

Registered accounting firms that issue audit reports for more than 100 issuers (primarily public companies) are required to be inspected annually.

[7] These are matters that are related to accounts or disclosures that are material to the financial statements, and involved especially challenging, subjective, or complex auditor judgment.

The first chairman in place at the PCAOB was former president and chief executive officer of the Federal Reserve Bank of New York, William Joseph McDonough.

This prohibition was made as a result of allegations, in cases such as Enron and WorldCom, that auditors' independence from their clients' managers had been compromised because of the large fees that audit firms were earning from these ancillary services.

Prior to the creation of the PCAOB, the audit profession was self-regulated through its trade group, the American Institute of Certified Public Accountants (AICPA).

One of the claims made by Goldschmid during the rancorous October SEC hearing was that the candidates put forward by Pitt had not been properly vetted.

Goldschmid's criticisms seemed prescient, and this, combined with other pressures, led Pitt to announce his resignation from the SEC on election day (November 4, 2002).

[15] In February 2006, the Free Enterprise Fund and Beckstead and Watts, LLP (a small Nevada-based accounting firm) filed a lawsuit in federal court challenging the constitutionality of the PCAOB.

[16] The United States Supreme Court granted certiorari on May 18, 2009, to consider three questions: Free Enterprise Fund v. Public Company Accounting Oversight Board was argued on Dec. 7, 2009.

In addition to the PCAOB, the United States (represented by Solicitor General Elena Kagan) also appeared as a respondent in the case and argued separately, defending the constitutionality of the Sarbanes-Oxley Act.

Thirteen amici, ranging from libertarian think-tanks like the Cato Institute to managers of state public-employee pension funds, filed briefs in the case.