State Board Report
While the Dodd‐Frank Act gives the Public Company Accounting Oversight Board (PCAOB) the ability to share information with foreign regulators, PCAOB Acting Chairman Daniel L. Goelzer explained, “Dodd‐Frank does not put foreign oversight bodies on a better footing than the State Boards. They will not get any additional information.” Addressing the Annual Meeting, Chairman Goelzer advised the Boards that while he could not make a blanket statement on the information the PCAOB could share with the State Boards, he suggested Boards contact the PCAOB on an individual basis.
The PCAOB is required to inspect all auditors who file with the SEC or do work related to SEC audits, and there are approximately 900 non‐U.S. auditing firms registered with the PCAOB. Logistically this presents a major challenge for the PCAOB, in terms of having the necessary expertise and gaining admittance into these foreign jurisdictions, Chairman Goelzer said. While the PCAOB has conducted nearly 250 foreign inspections in 34 countries, it is currently unable to inspect firms in China, Switzerland and member states of the European Union. The PCAOB’s Web site now lists firms that it cannot inspect and the public company clients of those firms. In addition, on October 2 the Board announced it would no longer routinely process registration applications from firms in countries where they are unable to perform inspections. Mr. Goelzer said it has been suggested that U.S. affiliates of these firms may need to provide more information to the PCAOB.
Noel L. Allen, NASBA legal counsel, pointed out that there are seven references to the State Boards within the Sarbanes‐Oxley Act (SOX). He asked Mr. Goelzer how the investigations procedure could be enhanced between the PCAOB and the State Boards. Mr. Goelzer said the Boards are alerted when the PCAOB brings an enforcement action. “We may need to make more progress on when we think the State Boards should deal with a matter,” he said. The PCAOB is working with the SEC to hold joint regulator meetings early next year.
Since its launch eight years ago, the PCAOB has announced settlements in about 35 cases. This year six have been announced, Mr. Goelzer said. In August the SEC asked Congress to amend SOX so the public could see the PCAOB’s litigated enforcement cases (see sbr 9/10). Although the PCAOB’s pace of enforcement picked up in the last year, “the public cannot see the full range of what we are doing,” Mr. Goelzer stated. He reported that during the time one PCAOB case was being litigated, the firm involved filed 29 audit reports.
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