Carmichael Essay

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Carmichael and Limperg’s Theory of Inspired Confidence 1. Who is the author of this paper and what is his position (give description of responsibilities) with the PCAOB at the time of this article? The author of this article is Douglas R. Carmichael and his position at the time of the article is the first Chief Auditor of the Public Company Accounting Oversight Board (PCAOB). He is the primary advisor to the PCAOB on policies and technical issues related to the auditing of public companies, including auditing standards. Mr. Carmichael is also the head of the PCAOB’s professional standard setting division. 2. What does Carmichael see as the underlying mission of the PCAOB? Carmichael believes that the underlying mission of the PCAOB is to restore the confidence of investors, and society generally, in the independent auditors of public companies. (p.128). Carmichael asserts that the public’s loss of confidence was the result of an “expectation gap”. This expectation gap, discovered by the Cohen Commission in the 1970’s, was a divergence of opinion between what the public believed and how auditors viewed their own role in reporting. (p.130). Historically, auditors were required to perform audits in accordance with generally accepted standards but as Carmichael noted, the auditors were the ones who designed the standards. (pp.129-130). Ironically, it was this very power--the power to define the auditor role, which served as a catalyst for creating the expectation gap. With the passage of the Sarbanes-Oxley Act of 2002, (the “Act” or “SOX”), this privilege was removed from the auditor and placed, to a certain extent, in the hands of the PCAOB, which is now responsible for the perception of, and response to, user expectations and needs in regards to the role of the auditor. (p. 130). 3. According to Carmichael, why is it so important that the

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