Extended scrutiny causes alarm for foreign auditors
US oversight board plays down growing number of overseas inspections
The US Public Company Accounting Oversight Board has attempted to allay fears
over plans to significantly increase the number of inspections of foreign audit
firms this year.
The board indicated that the rise was due to ‘natural growth’, and did not
indicate any change of policy or any new concerns about foreign auditors.
‘Yes, we are doing more inspections of foreign firms this year, in the same
way that we’re doing more inspections of US firms, but there is nothing new
about this,’ said a PCAOB spokeswoman.
‘We’re getting older as an organisation, and we have more inspectors, so
there will be more inspections, but this is actually a matter of course, it’s a
matter of this organisation maturing.’
Last year, 16 audit firms outside of the US were subject to inspections from
the body. BDO Stoy Hayward faced a PCAOB inspection during this time, which was
carried out in conjunction with the Financial Reporting Council’s audit
inspection unit. The Big Four and other large audit firms with US clients are
likely to be targeted this year, following discussion with the FRC.
‘We let the PCAOB come in because we wanted to show that our audit procedures
are as robust and strong as anyone else’s procedures, and we are as capable as
anyone else of auditing companies with US listings,’ said BDO managing partner
Jeremy Newman.
Concerns had been raised when the PCAOB was initially set up over its
extra-territorial powers and the risk of ‘double jeopardy’ – being tried and
potentially punished by two different regulators for the same misdemeanour.
The body has said that it will place some reliance on the oversight systems
of other nations. This level will be on a sliding scale, depending on how robust
these are.
A high level of reliance is expected to be placed on the UK oversight system,
but the PCAOB still has the power to stop a firm from carrying out audits if it
chooses to do so.