Regulator could bar European auditors practicing in US

European accounting firms could be barred from auditing US companies in a
move which has the potential to reshape the international audit market.

new regulations, announced today,
the US audit regulator can refuse access
to auditors based in jurisdictions where American inspectors are not allowed to
carry out inspections.

US legislation, set up in the wake of the 2002 Enron crisis, requires that
audit firms submit to regular inspections by the US audit regulator, the Public
Company Accounting Oversight Board (PCAOB).

However, the PCAOB has been blocked from conducting inspections in a number
of jurisdictions across the world, including the UK. It’s understood the UK’s
reporting regulator, the Financial Reporting Council, is pushing ahead with
reforms which would allow PCAOB inspections to take place, but, at present, no
formal agreement exists.

More than thirty European nations will also be affected, including France,
Germany, Greece, Italy, Netherlands and Spain. The move would particularly
affect European companies hoping to expand to the US, and may force them to
abandon their European-based auditor.

New or pending applications by non-US audit firms will be caught by the new
regulations, while the 78 UK accounting firms currently registered in the US
will be unaffected unless they are deregistered and forced to resubmit an

Accountancy Age
understands there are currently nine applications awaiting
approval, five of which originate from Europe.

The decision points to the increasing frustration of US regulators which are
not being allowed to carry out inspections in Europe. In a statement, PCAOB
Acting Chairman Daniel Goelzer said in the past firms have been allowed to
register in the US while negotiations continued with foreign regulators to
resolve the issue.

“Although we are still pursuing those efforts, the continuing obstacles to
inspections in some jurisdictions have forced us to re-evaluate that approach to
registration,” he said.

Under the new system European accounting firms will be able to plea their
case at a hearing, however if they can not satisfy US legislative requirements,
their application will be refused.

Further reading:

investigation blocked by US-EU regulator stand-off

audit row between regulators rages

greenlights US audit inspections

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