Denmark joins the growing list of countries that have struck agreements with the PCAOB to allow the board regulatory access to audit firms whose work is relied on by U.S. investors. The PCAOB says it has entered a cooperative arrangement, effective immediately, with the Danish Business Authority to oversee audit firms that are subject to the regulatory jurisdictions of both regulators.
Like many of its earlier agreements, the PCAOB’s agreement with Denmark provides a framework for joint inspections and allows the exchange of confidential information as permitted under the Dodd-Frank Act. "This is another step forward in our pursuit of robust international cooperation to help improve audit quality and protect investors," said PCAOB Chairman James Doty, in a statement.
The agreement with Denmark leaves only 11 countries that continue to deny PCAOB access to audit firms doing business in the United States. They are China, Hong Kong, Belgium, Czech Republic, Greece, Hungary, Ireland, Italy, Luxembourg, Poland, and Portugal. Within those countries, the PCAOB website shows nearly 60 audit firms that are registered to audit U.S. registrants but are escaping PCAOB inspection. Together they audit more than 350 U.S.-listed entities, with approximately 250 of those located in China alone.
The PCAOB reached a “memorandum of understanding” in May 2013 with authorities in China but it falls short of allowing inspections. The Securities and Exchange Commission is waging a battle to gain access to firms in China as well to investigate allegations of accounting improprieties that have led to a number of delistings. An administrative law judge placed a six-month ban on Big 4 network firms in China over their refusal to produce audit work papers, which the firms say they cannot provide without violating law in China.
Outside of China, Doty says the PCAOB continues to make progress in reaching agreements with more European Union countries. “We are in negotiations with a number of other EU member state regulators, such as Belgium, Italy, Luxembourg, Portugal, and several others, and hope to sign agreements in the near future with a number of them,” he says.