The Public Company Accounting Oversight Board (PCAOB) voted unanimously this week to require foreign accounting firms doing business in the United States to register with the Board by April 26, 2004. The European Commission had hoped for a total exemption from the registration requirements.
U.S. accounting firms that generate audit reports for public companies must register with the Board by October 24 of this year. The PCAOB watchdog panel, created as part of the Sarbanes-Oxley Act of 2002, was launched late last year with a $1.9 million loan from the Treasury Department. The organization plans to repay the loan.
Registering the foreign firms is critical to the Board's mission of rooting out fraud in corporate America. Created by Congress last summer in the wake of corporate and accounting industry scandals, the Board will inspect accounting firms and levy sanctions when appropriate.
"My hope is that the registration of accounting firms will, in fact, strengthen the accounting profession and restore public confidence in the quality and integrity of audits," said the board's acting chairman, Charles Niemeier.
The European Union said the registration requirement would subject foreign firms to two sets of rules and fly in the face of laws in other countries that protect client privacy. The Board seeks to reach a compromise with international regulators that would determine just what authority it has over foreign accounting firms. There may be some leeway given in cases where the firms are subjected to laws adopted to reform auditing in their own countries.
This week, the Board also set its 2003 budget at $70 million, with most of its revenue coming from the $67.9 million that it will collect from public companies. The Board answers to the Securities and Exchange Commission, which holds veto authority over Board actions. The SEC is set to determine this week if the Board can in fact carry out the duties it was established to perform.