The Public Company Accounting Oversight Board has struck cooperative regulatory agreements with two more European Union nations -- France and Finland -- as it continues to build a network of deals to oversee non-U.S. firms whose work is relied on in U.S. capital markets.
The agreements with audit authorities in France and Finland allow for joint inspections between authorities in those countries and the PCAOB, as well as the exchange of confidential information as allowed by the Dodd-Frank Act in the United States. The French agreement also establishes provisions for sharing confidential information under French law.
Sarbanes-Oxley had prohibited the PCAOB from sharing information with regulators in other countries, and PCAOB Chairman James Doty cited that prohibition as an obstacle to cooperation with other audit regulators in many countries. After Dodd-Frank amended Sarbanes-Oxley to permit the sharing of confidential information with regulators abroad, the board expected to be in a better position to reach new cooperative agreements.
So far, the PCOAB has established joint agreements with four other EU member states, including the United Kingdom, Germany, the Netherlands, and Spain. The board also has reached various types of arrangements with Switzerland, Norway, and several non-European regulators, such as Dubai, Taiwan, Israel, Japan, Singapore, Australia, Korea, and Canada.
More than 900 audit firms currently registered with the PCAOB are located outside of the United States in 87 jurisdictions. Currently, 25 registered firms are located in France and five are located in Finland. Despite the progress, the board still has a long way to go to gain access to all of those non-U.S. firms to perform its required regulatory inspections.
The board is still shut out of numerous other countries, where authorities cite concerns about sovereignty and conflict with their home country laws, most notably China, Hong Kong, Hungary, Denmark, Greece, Ireland, Belgium, Luxembourg, the Czech Republic, Poland, Portugal, Sweden, and Italy. The board maintains on its website a list of more than 400 public companies whose audits are not accessible to the PCAOB for inspection as a way to alert investors that their audits are escaping U.S. regulatory scrutiny.