Audit regulators globally are coordinating their oversight efforts through an agreement on how to exchange information.
The International Forum of Independent Audit Regulators has adopted a memorandum of understanding around how they will cooperate in exchanging information for audit oversight purposes. IFIAR is made up of audit regulators in 51 different countries, including the Public Company Accounting Oversight Board in the United States and the Financial Reporting Council in the United Kingdom.
The agreement is meant to facilitate cooperation in the exchange of information among member regulators to the extent their home country laws and regulations allow it. Information that might be exchanged would relate to the public oversight of auditors arising from inspections, investigations, enforcements and registrations, IFIAR says.
The PCAOB in the United States has spent several years painstakingly pursuing cooperation agreements with individual regulators in other countries where there are firms that have registered with the PCAOB. The board has so far struck agreements with regulators in 22 countries, although the nature of the agreements and the terms and conditions vary considerably. One of the agreements, for example, is with regulators in China, where despite the agreement the PCAOB is still barred from conducting inspections.
In addition to China, a handful of countries still prohibit the PCAOB from performing regulatory inspections that are required under Sarbanes-Oxley on audit firms that are registered to perform audit work relied on in U.S. capital markets. Those countries include Belgium, Hong Kong, Ireland, Italy, Poland and Portugal.. The PCAOB maintains a list on its website of U.S.-listed companies whose auditors are not inspected by the PCAOB as a result of legal obstacles.
While the PCAOB has bilateral arrangements with many regulators, including some that provide for joint inspections, the agreement may be helpful in fostering more global cooperation among audit regulators, says PCAOB spokesman Patrick Lunsford. “The MMOU may be useful for countries that do not yet have information-sharing arrangements with their counterparts," he said.