US outlines audit inspection criteria

The US audit oversight watchdog has announced the criteria it will use in
considering which countries it can fully rely on to oversee auditors of foreign

Speaking at an audit regulation conference in Brussels, Public Company
Accounting Oversight Board chairman, Mark Olson, said the developments were a
result of commitments by himself and European commissioner, Charlie McCreevy, to
advance collaborative efforts in 2007.

Olson proposed five principles, which include:

? the adequacy and integrity of the oversight system;

? the independence of the system’s operation from the auditing profession;

? the independence of the system’s source of funding;

? the transparency of the system; and

? the system’s historical performance.

Olson said the criteria would be applied by the PCAOB when assessing non-US
auditor oversight bodies for the purpose of determining whether the board may
place full reliance on that system in the context of inspections.

‘I understand that this is similar to how the European authorities will judge
whether the PCAOB is “equivalent” to the requirements under the Eighth
Directive,’ said Olson. ‘Like the Eighth Directive, the criteria necessarily
would combine aspects of an entity’s legal authority and how that authority is

He said the proposed policy statement outlines a framework for moving towards
full reliance and would involve the organisation working with its counterparts
to develop bilateral arrangements.

‘I envision that these arrangements would need to address in greater detail
the progression toward full reliance,’ he said. ‘Moreover, I would anticipate
that mutual agreements would set forth other aspects of cooperative arrangements
relevant to the facts and circumstances of each jurisdiction, including those
that govern information sharing, confidentiality, and data protection.’

Further reading:

Audit oversight regulators meet in

EU and US unite over oversight moves

Regulators to scrap dual inspections for audit firms

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