In the view of PCAOB Chair Mark Olson, it is critical for the Board to engage in cross-border cooperation with other audit oversight bodies when it inspects non-US audit firms so that regulatory arbitrage can be avoided. In recent remarks, he pledged that the Board would develop an oversight program that effectively takes into consideration the level of home country supervision for non-U.S. firms audit firms slated for PCAOB inspection.
To illustrate the importance of regulatory coordination to the PCAOB, he noted, more than 750 of the over 1750 firms registered with the Board are in countries outside the United States, although they may be affiliated with large, U.S- based audit firms. As required by the Sarbanes-Oxley Act, many of these firms are registered with the PCAOB because they audit non-U.S. companies whose securities trade in U.S. markets and are required to file audited financial statements with the SEC. In addition, a number of other non-U.S. firms are registered because they audit or wish to audit significant non-U.S. subsidiaries of multinational U.S. companies. With respect to both categories of firms, the PCAOB chair pledged that the Board will work closely with its foreign counterparts to minimize unnecessary overlap and achieve shared objectives in the oversight of these non-US firms.
Noting his role as a former back regulator, Chairman Olson expressed comfort with the concept of home and host regulators for international firms. Under the home-host regulatory model, emphasized the chair, each regulator, whether home or host, must maintain a robust oversight system, including the ability to routinely coordinate with other regulators and respond quickly and effectively to any concerns.
His remarks sound a similar theme as earlier remarks by EU Internal Market Commissioner Charlie McCreevy, who asked the PCAOB to develop a roadmap towards future cooperation between US and EU audit oversight bodies. This has been done in the accounting field, the commissioner noted, and should also be done for auditing. The starting point for cooperation between the PCAOB and EU should be the home country principle, he said, adding that regulatory duplication must be avoided.