EU Strikes Back Against Proposed PCAOB Rule
On April 14, the European Union (EU) promised retaliation for any move by the United States to require European firms to register with new U.S. accounting oversight board. The comment came in a letter by Frits Bolkestein, EU financial services commissioner, to William Donaldson, chairman of the Securities and Exchange Commission (SEC). Mr. Bolkestein wrote that if the United States moves ahead with the proposed rule, the EU would require U.S. firms to register with all 15-member EU nations.
In the letter, Mr. Bolkestein wrote that the controversial rule would place undue hardship on European firms that audit U.S. public companies. In March, the Public Company Accounting Oversight Board (PCAOB) voted unanimously in favor of requiring both U.S. and non-U.S. firms to register. The registration is meant to toughen U.S. auditing standards and is a key component of the Sarbanes-Oxley Act.
The EU contends that European firms don’t need to register with the PCAOB because they are already using stricter accounting rules, which were enacted in the 1980s. They argue that the U.S. rules could conflict with European rules and laws. In response to the proposed new registration process, a EU spokesperson said, "We don't necessarily want European firms to have to pay the price for legislation established in haste."
It is unclear whether the PCAOB and the SEC will cede to the request by the EU and allow European firms to be exempted from the new rule. Even so, at least one EU member is taking a different stand. The Financial Times reports that UK auditors are asking the EU to quit focusing on efforts to require the United States to exempt all EU firms and instead to allow individual governments to negotiate exemptions.