The Public Company Accounting Oversight Board has agreed to a statement of protocol with the Auditing Oversight Authority of the Slovak Republic as the PCAOB comes under threat of being folded into the Securities and Exchange Commission.
The PCAOB announced the bilateral arrangement Tuesday and said it went into effect May 5. The pact will offer a framework for facilitating regulatory cooperation in supervising the oversight of auditors and public accounting firms.
“Today’s agreement is just the latest successful example of the PCAOB working around the globe to protect investors in U.S. markets,” said PCAOB chair Erica Williams in a statement Tuesday.
Last week, the House Financial Services Committee passed legislation transferring the PCAOB’s responsibilities to the SEC. Williams defended the role of the PCAOB in an interview the next day at an accounting conference at Baruch College in New York, and pointed out that the PCAOB has signed agreements with audit regulators in over 50 jurisdictions around the world, including a hard-fought one with China after passage of the Holding Foreign Companies Accountable Act, and those agreements aren’t necessarily transferable to the SEC.
“I don’t know if they’d be able to renegotiate it, but in order to be able to inspect and investigate completely there, as required by the HFCAA, they would need to have a new statement of protocol,” Williams said.
Last week, during a meeting of the PCAOB’s Investor Advisory Group, Williams further explained what was involved in reaching such agreements.
“Local laws in many of those countries require cooperative agreements that the PCAOB has secured over years of negotiation to ensure we have the access necessary to inspect and investigate completely,” she said.
“None of the agreements contain provisions that would allow the PCAOB’s privileges and responsibilities under the agreements to be transferred to the SEC,” Williams added. “They would have to be renegotiated before inspections could be conducted, which could take years.”
