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US law breaks PCAOB co-operation barriers

  • Author: US law breaks PCAOB co-operation barriers
  • Published: 22 Jul 2010
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The US Public Company Accounting Oversight Board (PCAOB) can now share information with foreign auditor oversight authorities, thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted by US President Barack Obama.

The PCAOB has been unable to inspect the auditors of up to 400 non-US companies listed on US capital markets due to legal obstacles.

The European Commission, China and Switzerland have refused to let the PCAOB inspect firms, but the Dodd-Frank Act should allow the PCAOB to resume co-operation with Europe at least.

This will be a relief to firms that have been placed in an uncomfortable position trying to comply with both their national regulators and the PCAOB.

The Dodd-Frank Act, which forms part of the US government’s response to the credit crisis, also closes gaps in the PCAOB’s authority to oversee audits of broker-dealers.

Under the Sarbanes-Oxley Act (SOX), auditors of brokers-dealers were required to register with the PCAOB, but the PCAOB did not have the power to regulate them. Now, the PCAOB will have standard-setting, inspection and disciplinary authority.

Accounting standards

The legislation has also created a new systemic risk regulator called the Financial Stability Oversight Council (FSOC). It will be chaired by the Treasury Secretary and members will be the heads of regulatory agencies, including the US Securities and Exchange Commission (SEC).

A duty of the FSOC is to monitor domestic and international financial regulatory proposals and developments on accounting issues and advise Congress by making recommendations to enhance the integrity, efficiency, competitiveness and stability of the US financial markets.

The FSOC may also submit comments to the SEC and any standard-setting body with respect to an existing or proposed accounting principle, standard or procedure.

The Dodd-Frank Act has also exempted small listed companies from complying with Section 404(b) of the SOX.

Companies with a market capitalisation of less than $75 million – known as non-accelerated filers – were previously required to implement and report on internal controls, and have these reports audited as per SOX.

 

Related articles

Senate bill exempts small companies from SOX

Lobby groups urge Senate to resist SOX exemption

CAQ defends Sarbanes-Oxley Act

Sarbanes-Oxley comes under fire in US High Court and Congress

PCAOB lists uninspected foreign companies

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