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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →In brief: U.S. GAAP governs how a company accounts for and presents its financial statements; SEC rules and securities laws govern public-company filings, disclosures, and related obligations; PCAOB standards govern how registered public accounting firms conduct audits and related professional work. They apply together, but they are not interchangeable.
What does each framework govern?
| Framework | Primary subject | Who it principally affects | Practical question it answers | Source of authority |
|---|---|---|---|---|
| U.S. GAAP | Financial accounting and reporting: recognition, measurement, presentation, and disclosure. | Companies preparing financial statements and people who use them. | How should a transaction or balance be accounted for and presented? | FASB sets financial accounting and reporting standards recognized by the SEC for federal securities-law purposes, subject to the Commission’s authority. SEC FASB policy statement |
| SEC rules and federal securities laws | Public-company registration, filing, disclosure, securities-law obligations, and requirements that can also affect auditors. | Issuers, auditors, and other participants subject to securities laws. | What must a registrant file or disclose, and what legal requirements apply? | The SEC and federal securities laws. |
| PCAOB standards | Audits and related professional work, including auditing, attestation, quality control, ethics, and independence standards. | Registered public accounting firms and associated persons within the standards’ scope. | How must an audit be planned, conducted, documented, and reported? | The PCAOB, under the Sarbanes-Oxley Act and SEC oversight. |
What is the difference between PCAOB standards and GAAP?
GAAP is the accounting framework used to prepare financial statements. PCAOB standards are rules for the auditor’s work on engagements within PCAOB scope. GAAP does not tell the auditor how to plan or perform an audit; the auditor uses applicable auditing standards to examine whether the statements are fairly presented under the relevant reporting framework.
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That distinction matters when a financial statement contains an error. The accounting question is whether the company recognized, measured, presented, or disclosed an item correctly under GAAP. The audit question is whether the auditor performed and reported the engagement in accordance with the applicable audit requirements.
Are PCAOB standards the same as SEC rules?
No. The PCAOB sets standards for audit practice under SEC oversight, while SEC rules and securities laws establish filing, disclosure, and other regulatory obligations. The SEC’s oversight does not make PCAOB standards a substitute for Commission rules. The SEC has stated that PCAOB auditing-report standards do not supersede its rules and regulations. SEC guidance on issuer audits
The frameworks can touch the same engagement. An issuer may have to meet SEC filing and disclosure requirements, prepare financial statements using the applicable accounting framework, and engage an auditor that follows PCAOB standards and applicable SEC requirements.
Who sets accounting standards for public companies?
FASB is the private-sector standard setter whose financial accounting and reporting standards the SEC recognizes as generally accepted for federal securities-law purposes. The SEC retains authority over financial reporting by registrants, so it is inaccurate to say either that the SEC writes all U.S. GAAP or that FASB’s role removes the Commission’s authority.
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In its August 25, 2003 policy statement, the SEC said FASB’s standards were recognized as generally accepted for purposes of the federal securities laws. SEC policy statement on FASB
How do PCAOB, SEC, and FASB work together?
- The company prepares its statements. It applies the financial reporting framework relevant to its filing, including applicable U.S. GAAP requirements.
- The issuer meets securities-law obligations. SEC rules and federal securities laws govern the required filings and disclosures, as well as other obligations relevant to the registrant.
- The auditor performs the audit. For an issuer engagement subject to PCAOB rules, the registered public accounting firm follows applicable PCAOB standards and applicable SEC requirements.
GAAP and auditing standards are sometimes confused because older legal or regulatory text may refer to “GAAS.” In 2004, the SEC said references in Commission rules, staff guidance, and federal securities laws to GAAS or specific GAAS standards, as they relate to issuers, should be understood to mean PCAOB standards plus applicable Commission rules. That interpretive treatment does not turn GAAP into an audit standard or make PCAOB standards a replacement for securities law. SEC interpretive guidance
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why can PCAOB standards change?
The SEC announced on August 20, 2024, that it had approved PCAOB AS 1000, General Responsibilities of the Auditor in Conducting an Audit, related amendments, and changes to a PCAOB contributory-liability rule. This is an example of SEC oversight in the standard-setting process; the announcement alone does not establish the status of later amendments or the current effective-date requirements. Check current PCAOB standard text and subsequent SEC actions before relying on a particular requirement. SEC announcement of the 2024 approval
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