When the company begins preparing for public markets or aims to become an SEC registrant, one of the initial questions that arises is: how is a PCAOB audit different from a normal audit?
The answer is connected with the standards and scope as well as the level of oversight involved. It should be recognized that a PCAOB audit follows the strict PCAOB audit standards established by the Public Company Accounting Oversight Board—an organization created by the Sarbanes-Oxley Act of 2002. Such audits are mandatory for public companies as well as SEC registrants, and they are designed to fulfill the heightened audit requirements for public companies.
On the contrary, private companies usually undergo audits under the Generally Accepted Auditing Standards (GAAS) issued by the AICPA. This difference—PCAOB vs GAAS—is significant since the PCAOB imposes more comprehensive documentation rules and risk assessments alongside inspection processes.
The distinction should be acknowledged not only for compliance. It is also fundamental for maintaining investor trust and making sure that the audit holds up under regulatory scrutiny. If the business is going public or already trades on an exchange, then the auditor must be PCAOB-registered. It is a non-negotiable requirement.
Who needs a PCAOB audit?
One more thing: PCAOB standards should not be confused with US GAAP. It is true that PCAOB vs US GAAP might sound like competing frameworks. Yet, they actually serve different purposes. GAAP refers to the accounting principles leveraged to prepare financial statements, and PCAOB standards govern how such statements are audited.
The primary role of PCAOB is to oversee the audits of public companies and broker-dealers in order to make sure that financial statements are dependable and transparent for investors.
It should be noted that the PCAOB is vital in shaping and maintaining confidence in public markets from many aspects as outlined below:
In a nutshell, the PCAOB present assistance to make sure that auditors meet high-quality benchmarks. Instead of audits under GAAS, which apply to private entities, PCAOB standards reflect the greater responsibility tied to public capital markets.
Let’s break it down: how is a PCAOB audit different from a normal audit?
The main takeaway is PCAOB audits go deeper and are held to a higher bar—especially important for internal controls and documentation.
A PCAOB audit is not just a best practice—it is a legal requirement for certain entities operating in U.S. capital markets. If the organization falls into one of the categories listed below, compliance with PCAOB audit standards is mandatory:
At the core of every PCAOB audit are management’s assertions—the underlying claims made in a company’s financial statements. Such assertions should be supported by reliable evidence and tested against PCAOB audit standards. The key areas are outlined below:
It is true that these assertions are also found in GAAS audits. However, a key difference—central to understanding “how a PCAOB audit is different from a normal audit?”—is the heightened emphasis on internal controls. PCAOB audits pay close attention to how well a company’s internal systems support these assertions, especially in the context of ICFR (Internal Control over Financial Reporting).
This added layer of scrutiny is one reason audit requirements for public companies are more demanding than those for private entities.
This is a common point of confusion. As it was indicated above, U.S. GAAP sets the rules for how financial statements should be prepared. On the other hand, PCAOB audit standards govern how those financials are examined and tested by auditors.
It should be noted that during a PCAOB audit, the auditor’s role is not to apply new accounting rules. The auditor’s role is important in order to evaluate whether the company’s reporting follows U.S. GAAP accurately.
Acknowledging the distinction between PCAOB vs US GAAP presents assistance in clarifying the scope of an audit and reinforces why these frameworks are complementary, not competing.
PCAOB audits were created to serve one purpose: to protect public investors and preserve confidence in the financial markets. Compared to standard audits under GAAS, they apply a more rigorous approach in several key areas:
This level of oversight sets them apart from audits governed by the AICPA. It’s a key reason how a PCAOB audit is different from a normal audit, especially for those handling the audit requirements for public companies. It should be noted that these audits are not just procedural—they are fundamental for protecting trust in the capital markets.
So, how is a PCAOB audit different from a normal audit? As a conclusion, it is about the standards applied and the depth of oversight as well as the type of organization involved. Companies that are public—or preparing to go public—should fulfill the audit requirements for public companies set by the PCAOB. It is not only important for full compliance but for transparency and upholding the trust of investors.
Within this context, PCAOB audits follow stricter protocols instead of audits governed by GAAS. They focus heavily on internal controls and are subject to routine inspections. This distinction matters for businesses entering the public arena.
If the company is approaching an IPO, working with SEC-registered investors, or expanding into public markets, you may fall into the category of who needs a PCAOB audit.
At Dimov Audit, we specialize in performing audits that fully comply with PCAOB audit standards—aiding establishments transition with confidence. Contact us today to find out whether your company requires a PCAOB audit or to schedule a compliance consultation.
PCAOB standards govern audits; U.S. GAAP governs how financials are prepared.
Public companies, IPO candidates, and broker-dealers, as well as specific foreign issuers.
Assertions like existence and completeness alongside valuation guide audit testing.