The new U.S. board set up to regulate accountants on Wednesday voted to take over responsibility for setting auditing rules, marking the end of an era in which the accounting industry set its own standards.
Under the Sarbanes-Oxley Act — a sweeping corporate reform bill passed last year — the Public Company Accounting Oversight Board had the option to leave the auditing standard-setting process to another group, but decided against that.
So far, the accounting profession has been governed by auditing rules developed and issued by the Auditing Standards Board, an arm of the industry's main trade and lobby group — the American Institute of Certified Public Accountants.
The recently formed accounting board, which named departing New York Federal Reserve President William McDonough as its new head on Tuesday, also agreed to set auditing rules with help from an advisory group to be set up comprising of accounting, investing and other experts.
Apart from setting auditing rules, the board's other crucial task will be to regularly inspect major accounting firms. It can also revoke an auditing firm's registration and set fines up to $15 million.