The Public Company Accounting Oversight Board (PCAOB) and the Danish Business Authority (DBA) entered into a cooperative arrangement on July 18 that gives both regulators oversight of audit firms in their respective jurisdictions.
The PCAOB’s agreement with the DBA, which takes effect immediately, provides a framework for joint inspections and allows for the exchange of confidential information under the provisions of the Dodd-Frank Act. Those provisions amended the Sarbanes-Oxley Act to permit the PCAOB to share confidential information with its non-US counterparts under certain circumstances. Also part of this deal is an agreement on data protection.
“This is another step forward in our pursuit of robust international cooperation to help improve audit quality and protect investors,” PCAOB Chairman James Doty said in a written statement on Friday. “We look forward to working closely with our Danish counterparts and believe it will be to our mutual benefit.”
The PCAOB has reached similar agreements with Finland, France, Germany, the Netherlands, Spain, Sweden, and the United Kingdom. In addition, the US audit regulator has agreements in Switzerland and Norway, as well as with several regulators in North America, the Middle East, Asia, and Australia.
“Our ongoing efforts to reach cooperative agreements with European Union member state regulators continue,” said Bruce Wilson, PCAOB director of international affairs. “We are pleased that we have found a way to move forward with a framework for joint inspections with the DBA.”
Since the inception of its non-US inspection program in 2004, the PCAOB has conducted inspections in 44 non-US jurisdictions, and where possible, the board aims to coordinate its inspections with the local authorities to enhance cooperation and the sharing of information.
Under the Sarbanes-Oxley Act, the PCAOB oversees and inspects all accounting firms that regularly audit public companies whose securities trade in US markets. The US regulator conducts inspections annually for firms that regularly provide audit reports for more than 100 issuers, and at least triennially for firms that regularly provide audit reports for 100 or fewer issuers.
More than 900 of the approximately 2,300 audit firms currently registered with the PCAOB are located outside of the United States, including five registered firms in Denmark.
Doty recently told the Wall Street Journal that the PCAOB and Chinese regulators have made significant progress toward working out a way for the United States to inspect the work of Chinese audit firms, and the first such inspection is expected before the end of the year.
Michael Rapoport of the Wall Street Journal wrote on July 15 that such an agreement between the United States and China would be a significant breakthrough. US and Chinese regulators have long differed over how much oversight the United States should be allowed to exert over Chinese companies that trade on US markets and the Chinese accounting firms that audit them, including Chinese affiliates of the Big Four accounting firms.