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.
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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.
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Sarbanes-Oxley comes under fire in US High Court and
Congress
PCAOB lists uninspected foreign companies
