US PCAOB gets oversight of Luxembourg audit firms

The US accounting and audit regulator, the Public Company Accounting Oversight Board, has reached a Cooperative Agreement with its counterpart in Luxembourg, the Commission de Surveillance du Secteur Financier (CSSF), in relation to oversight of auditors in both jurisdictions, subject to the regulations governing them

PCAOB chairman James R. Doty, who signed the agreement last week during a visit to CSSF offices, said that this would now reflect the strength and depth of the PCAOB’s relationships in Europe.

The PCAOB is expected to oversee and inspect all accounting firms that regularly audit public companies whose securities trade in US markets, under requirements of the US Sarbanes-Oxley Act.

The Act requires the PCAOB to conduct 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.

‘We have a shared commitment to improve audit quality and protect investors through cross-border cooperation,’ said Doty.

‘Because audit work crosses borders, so too must regulators work together to fully protect investors from the risks inherent in international group audits. With this agreement, CSSF and PCAOB teams can now share their insights and jointly inspect audit firms whose dual-listed clients collectively have a market capitalization of about $33bn [£21.4bn],’ he added.

The PCAOB has reached similar agreements in the European Union with Greece, Denmark, Hungary, Sweden, Finland, France, Germany, the Netherlands, Spain, and the United Kingdom.

Additionally, the PCAOB has agreements with Switzerland and Norway, and with several regulators in North America, the Middle East, Asia, and Australia.

The agreement with the CSSF provides a framework for joint inspections and allows for the exchange of confidential information in accordance with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Those provisions amended the Sarbanes-Oxley Act of 2002 to permit the PCAOB to share confidential information with its non-US counterparts under certain circumstances. An agreement on data protection is also part of this cooperative arrangement.

‘This agreement is a reflection of the stable framework for cooperation that the PCAOB has established with its partners in the European Union,’ said Bruce Wilson, PCAOB Director of International Affairs.

‘We are pleased with the progress and look forward to the European Commission's renewal of the Adequacy Decision to promote longer term stability to this cooperation on behalf of global investors on US and EU markets.’

In 2010, the European Commission adopted an Adequacy Decision that permits EU audit regulators to conclude cooperative agreements with the PCAOB, and renewed that decision in 2013. The decision must be renewed again by July 2016.

Since the inception of its non-US inspection program in 2004, the PCAOB has conducted inspections in 45 non-US jurisdictions.

Where possible, the PCAOB seeks to coordinate its inspections with the local authorities to enhance cooperation and the sharing of information.

More than 900 of the approximately 2,300 audit firms currently registered with the PCAOB are located outside of the United States, including four registered firms in Luxembourg.

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