The UK’s largest accountancy firms could be banned from auditing US-listed companies after Washington’s new watchdog refused to budge on its stringent registration requirements.
The PCAOB, chaired by William McDonough, said it could not exempt UK firms from a requirement to submit personal information about staff, even though to do so could mean breaching employees’ rights.
Christi Harlan, public affairs director at the PCAOB, said: ‘The question is whether there is enough information in an application for the board to feel comfortable registering a firm. There is no blanket consideration.
If something we have asked for as part of the legislation conflicts with home country law, firms need to tell us that and give us a description of the law and their efforts to get an exemption or make the laws dovetail with our rules.’
UK firms that audit US public companies are currently asking thousands of staff and clients for permission to submit their information to the US watchdog in a bid to avoid breaching the Data Protection Act.
The DPA – derived from the right to private and family life enshrined in European legislation – means staff have the power to block the information demanded by the PCAOB, which includes details of criminal records.
Clive Ward, regulatory partner for Ernst & Young, said: ‘The US rules were designed with US laws in mind, but they don’t translate easily into other jurisdictions. It’s illegal for us to just send out information on our staff.’
Ward said it was inevitable that a ‘small number’ of employees would refuse firms permission to submit their details, raising the possibility that the PCAOB could ban them from US audits. But Harlan said: ‘I do not think the board can single out individuals. We may decide we can live without the information, but we won’t know until we see the application.’
Meanwhile the PCAOB denied that it wanted details of ‘thousands’ of staff at the largest firms, despite the massive effort underway.
Confusion over the registration process was partly brought about by a lack of communication across the Atlantic. But firms are now doing their best to conform. Ward said: ‘There’s a lot of personal irritation, but at the end of the day it’s important to our business and it’s something we have to comply with.’
For more on this story, see www.accountancyage.com/news/1136454.
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