PCAOB chief William McDonough has said that the board is in active discussions with the European Union, and has full faith it can fulfil its duties under Sarbanes-Oxley Act, without creating international difficulties.
What this means exactly is still open to conjecture, but it looks as if there will be a system of information sharing between both sides of the Atlantic.
While the EC may not be entirely happy with the eventual compromise, it is certainly better than the impasse of a few months back. Internal markets commissioner Frits Bolkestein was screaming blue murder, over the extra-territorial effects of Sarbanes-Oxley and the new board’s requirements for foreign audit firms to register with the board by April 2004.
Meanwhile, the PCAOB seemed to think that allowing an extra six months for overseas firms to register was a generous compromise.
It is encouraging to see that discussions have continued, and that the board now seems willing to consider these opinions.
On the other hand, it was overdue. The SEC must have known that the effects of the Sarbanes-Oxley Act on foreign firms would be inflammatory, but it had refused to accept they might be a little extreme.
Even now, any concession made from its side is likely to be small, but at least it may stop a wall of Berlin proportions from building up between the US and EU worlds of accountancy and financial regulation.
Any agreement reached over this incendiary topic should be used as a foundation for further dialogue, and perhaps future co-operation. It may be that many of our European counterparts are not too impressed with US behaviour, but its influence is undeniable and is unlikely to wane any time soon.
However, the EU’s significance is also growing, and the US would be well served not to throw its weight around too much. It is certainly not impossible to foresee a situation in the near future when their roles may be reversed.
- Paul Grant is senior reporter at Accountancy Age.
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