State Board Report
The Public Company Accounting Oversight Board will be explicitly reminding their newly registered auditing firms that registration with the PCAOB does not supersede licensing requirements that apply in the jurisdictions where they engage in practice, PCAOB Chair James R. Doty assured the State Boards in his keynote address at NASBA’s Annual Meeting, on October 24 in Nashville. “And staff will encourage firms to consult with the appropriate state regulator to insure that the firm is in compliance with applicable law. Our website will also provide this reminder to already registered firms,” he stated.
Mr. Doty explained that the PCAOB has introduced projects based on “the principle that audit regulation should foster conduct and a culture consistent with the franchise that the securities regulatory regime accords the audit profession.” These include debate on the form and content of the standard auditor’s report, mandatory auditor term limits, requiring engagement partners to sign audit reports and providing more transparency about the firms that contribute to global audits.
He noted that the PCAOB remains unable to inspect registered firms that perform or participate in U.S. audits but reside in China or some parts of Europe; however, he was hopeful that the concerns raised by the authorities in those countries could be resolved. Chair Doty observed: “Press accounts now say the Chinese authorities have called in the heads of global firms to lay down the law and seem to suggest that they are prohibiting the firms from bringing out of China summaries of audit results. If true, that, of course, would go well beyond keeping PCAOB inspectors out of China. It would be a long-arm interdiction of the global firm’s maintenance of its own work papers.”
Chair Doty noted the PCAOB’s enforcement is delayed because its investigations and any contested disciplinary proceedings must remain non-public unless the respondents consent to publication of the PCAOB’s complaints and decisions. One firm issued 29 additional audit reports on public company financial statements between the commencement of the PCAOB’s proceedings and the public disclosure of its charges. The PCAOB has asked Congress to change this law. “Secrecy about the problem not only erodes public confidence in the PCAOB’s ability to police registered firms, but it inevitably undermines confidence in state authorities’ resolve too,” Chair Doty said.
- MEMBER CENTER