At a recent NASBA international forum, PCAOB Member Dan Goelzer said that a goal of the Board is to enhance international cooperation and audit oversight and thereby strengthen PCAOB oversight of non-U.S. auditors and audit work. Noting that there are PCAOB registered firms in 88 countries, he said that the Board has conducted 300 inspections in 33 jurisdictions. While the Board has been unable to inspect in most of Europe and in China, he said, the PCAOB is in active negotiations with EU members and Chinese authorities to open doors to inspections. The PCAOB recognizes that trust and cooperation between regulators with common goals is the key to fulfilling its mission, said Member Goelzer, and that there are investor protection issues when the PCAOB cannot inspect auditors. NASBA is the National Association of State Boards of Accountancy.
Member Goelzer also said that the Board is actively supporting the work of the International Forum of Independent Audit Regulators (IFIAR), which was created in 2006 as a vehicle for independent audit regulators from around the world to share ideas and assist each other in their oversight. IFIAR now has 38 members, and Mr. Goelzer is currently vice chair of IFIAR, which is chaired by Paul George, Director of Audit at the UK’s Financial Reporting Council.
IFIAR focuses on a number of important activities, including sharing knowledge of the audit market environment and practical experience and promoting collaboration and consistency in regulatory activity. IFIAR also provides a platform for dialogue with other international organizations that have an interest in audit quality. The Forum also conducts inspections workshops. IFIAR currently has a number of Working Groups, including an Investor Working Group chaired by PCAOB Member Steven Harris.
At their last meeting, IFIAR Members agreed upon a set of Core Principles for independent audit regulators. The core principles cover the structure of audit oversight, the operations of audit regulators, and inspection processes. While the Core Principles are not binding, IFIAR Members are encouraged to comply with the Core Principles in their own jurisdictions.
Member Goelzer also said that the Board’s focus on improving the audit report is consistent with international efforts in this area. For example, he noted that other regulators are also addressing this issue, pointing to a European Commission Green Paper and an IAASB Consultation Paper. The PCAOB Concept Release on possible revisions to reports on audited financial statements, released on June 21, 2011, set forth four alternatives paths to reform: 1) auditor’s discussion and analysis; 2) required and expanded use of emphasis paragraphs; 3) auditor assurance on information outside the financial statements; and 4) clarification of language in the standard report. The next step is a Roundtable planned for September.