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PCAOB clamps down on foreign auditors

Audit firms based outside the US could be prevented from auditing US companies following an amendment to registration rules.

Non-Public Company Accounting Oversight Board (PCAOB)-registered firms will find it much harder to gain access to US companies if they are based in countries where US inspections are not allowed.

The rules could affect the global audit market because US companies will be deterred from hiring unregistered auditors in those jurisdictions.

Grant Thornton International global head of assurance Ken Sharp agrees firms may now be unfairly chosen due to their registration status. He wants the rules to be applied consistently, with all firms treated alike.

"If a country cannot provide access to the PCAOB, directly or indirectly, then all firms should be treated equally whether they are registered or not," Sharp said.

Leaders have previously complained about regulation barriers and the extra cost it is adding to the audit process. In some cases, firms have been asked to break the law in one country to comply with another regulator’s demands.

Sharp disagrees firms will violate local laws but insists conflicts between lawmakers and regulators must be resolved to ensure there is no pressure on firms to bend the rules.

It is also impractical for auditors to be inspected by two different authorities who could hand down completely different outcomes.

While Sharp says the profession supports independent regulation, mutual reliance between countries would ease the burden.

"We don’t mind being reviewed once," Sharp says. "But we would rather not be reviewed 25 to 30 times, otherwise we spend more time being reviewed than doing the audits to start with."

The PCAOB said it is seeking to strike deals with non-US audit regulators but ‘problems’ with some jurisdictions forced it to re-evaluate its registration approach.

It will continue to allow applications to remain as ‘pending’ while the go-ahead for an inspection is ascertained.

If an inspection is not allowed, it will issue a notice of hearing and consider whether approval of the application would be consistent with its responsibility under the Sarbanes-Oxley Act.

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