Final answer:
The PCAOB develops auditing standards for public companies, while the AICPA focuses on private firms, with the PCAOB being created after the Sarbanes-Oxley Act to increase investors' confidence in public financial information and prevent accounting fraud.
Step-by-step explanation:
The roles of the American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB) in establishing auditing standards are notably different. The correct option describing their roles is: d) PCAOB develops standards for public companies, while AICPA focuses on private firms.
After the Sarbanes-Oxley Act was enacted in 2002 in response to major accounting scandals, the PCAOB was established to oversee the audits of public companies in an effort to protect investors and further public interest by promoting informative, accurate, and independent audit reports.
The American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB) both play important roles in establishing auditing standards. The AICPA sets auditing standards for private companies, while the PCAOB focuses on public companies.
The AICPA's standards are known as Generally Accepted Auditing Standards (GAAS) and are used by auditors in private company audits. On the other hand, the PCAOB's standards are known as Auditing Standards and are used by auditors in the audits of public companies.