State Board Report
The Public Company Accounting Oversight Board now has agreements with 14 foreign regulators to share firm inspection information and has conducted 338 inspections in 38 different countries, PCAOB member Lewis H. Ferguson told the NASBA Annual Meeting. “We believe cooperating with international regulators is terrifically important to regulation of auditors and audit quality,” he stated. “We find the only effective way to deal with a global network is to show the regulators are coming together.” There are difficult data protection and confidentiality issues involved, but these are being worked on through the International Forum of Independent Audit Regulators, Mr. Ferguson said.
As Chinese regulators will not allow any foreign inspectors to conduct reviews on Chinese soil, the PCAOB has been meeting with delegations from China to permit observations of the Chinese doing their own firm inspections. The next such meeting is scheduled for November. GE, GM and IBM all have huge operations in China, he noted, which leads to U.S. investor concern about the quality of work being done in that country. Ultimately if the Chinese do not respond to the SEC’s and PCAOB’s information support demands, as required under IOSCO, they will not be allowed in the U.S. capital markets, Mr. Ferguson warned.
The PCAOB shares information with 32 State Boards of Accountancy, Mr. Ferguson reported. To receive the PCAOB’s reports the State Board has to agree to comply with the confidentiality provisions set out in the Sarbanes-Oxley Act of 2002. The public portions of the PCAOB’s reports are sent to all Boards and all have been invited to sign the confidentiality agreement. Mr. Ferguson said the PCAOB cooperates with State Boards on enforcement and appreciates NASBA’s comments. He pointed out that a NASBA representative has served on the PCAOB’s Standing Advisory Group since its inception.
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