1. The Role of Research at the PCAOB
Gary Holstrum
Associate Chief Auditor and
Director of Research, PCAOB
Auditing Section Doctoral Consortium
January 12, 2006

2. Caveat
The views I express are my own personal views and not necessarily those of the PCAOB or of the Office of the Chief Auditor.

3. Career Influences: Personal Experiences
PhD background (Iowa) & first teaching position (U of Texas)
Transition to auditing research
(U of Florida)
Late 1970s
Congressional scrutiny of profession
Pressure to increase research input into standards-setting process
Consideration of AICPA Director of Research position
Partnership at Deloitte
Auditing Standards Board
Research input re: Confirmations
International Accounting Education Standards Board
PCAOB

4. Potential role of research in standards-setting process
The potential impact of research
Inherent limitations
Significant increase in auditing research in the last years
Difficulty that standards-setters have in identifying relevant research, evaluating its validity, and synthesizing its significance
Solution: Have standards-setters work with academic researchers to develop synthesis of research that is relevant to each major standards-setting project

5. 2006 Proposed Standards-Setting Activities
Auditor Risk Assessments*
Audits of Fair Value*
(*Research teams formed in early 2005
Engagement Quality Review
Communications with Audit Committees
Audit Firm Quality Control
Financial Fraud
Audit Confirmations
Auditing Related Party Transactions
Audit Reporting Model

6. Research Input to PCAOB Standards-Setting Projects
Auditing Section of the American Accounting Association
Created teams of researchers to prepare a synthesis of existing research
For all major PCAOB Standards-Setting Projects
Unprecedented level of relevant, usable research input
Seven new teams formed (Early November 2005)
Two research teams formed earlier
Risk assessment team has completed synthesis
Audits-of-fair-value team is in process of completing its synthesis

7. Research Synthesis Teams for PCAOB Standards Projects
Auditor Risk Assessments*
Audits of Fair Value*
(*Research teams formed in early 2005
Engagement Quality Review
Communications with Audit Committees
Audit Firm Quality Control
Financial Fraud
Audit Confirmations
Auditing Related Party Transactions
Audit Reporting Model

8. Information about Research Synthesis Teams
Presentations by Auditor Risk Assessments Team and Audits of Fair Value Team at 1:30 p.m. Saturday, January 14
PCAOB Briefing Papers on all nine projects are available on PCAOB Web Site (
Under Standing Advisory Group--For various SAG meeting dates
Also hyperlinked via Auditing Section web site:
PCAOB Standards-Setting Update articles in each recent issue of The Auditor’s Report
Announcement for PCAOB Research Teams

9. Opportunities for Current Accounting Doctoral Students
Related to current research synthesis projects
Related to anticipated future research synthesis projects
Other research opportunities (in critically important areas)

10. Other Research Opportunities: Cost-benefit analyses
Need for more cost-benefit research with more valid measures of the benefits related to SOX, 404, PCAOB Auditing Standard #2, and other PCAOB activities
Media filled with cost data
Very little research data on the real benefits to investors and the public interest
Need to measure the cost of fraudulent financial reporting to investors and the public interest
Estimating the likelihood of a decreased incidence of fraudulent financial reporting or materially misstated financial information
Need for synthesis of valid cost-benefit research

11. Conclusion: PCAOB MISSION
To oversee the auditors 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.

12. Bottom Line: Standards-Setters Need Your Help as Researchers