The Public Company Accounting Oversight Board has entered into a cooperative arrangement with the Danish Business Authority for the oversight of audit firms in both regulators’ jurisdictions.
The agreement takes effect immediately and is part of the PCAOB’s efforts to inspect firms abroad that audit companies whose securities trade on U.S. markets.
“This is another step forward in our pursuit of robust international cooperation to help improve audit quality and protect investors,” said PCAOB chairman James R. Doty in a statement. “We look forward to working closely with our Danish counterparts and believe it will be to our mutual benefit.”
The agreement with the authority in Denmark 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-U.S. counterparts under certain circumstances. An agreement on data protection is also part of this cooperative arrangement.
“Our ongoing efforts to reach cooperative agreements with European Union member state regulators continue,” said PCAOB director of international affairs Bruce Wilson. “We are pleased that we have found a way to move forward with a framework for joint inspections with the DBA.”
Within the EU, the PCAOB has reached similar agreements with Sweden, Finland, France, Germany, the Netherlands, Spain, and the United Kingdom. In addition, the PCAOB has agreements in Switzerland and Norway, and with several regulators in North America, the Middle East, Asia and Australia.
The PCAOB still has not been able to inspect auditing firms in China, but it has been making more progress on getting cooperation from the Chinese authorities. Doty told Reuters on Tuesday that officials from both countries held high-level talks in Beijing last week and committed to cross-border inspections, with the first inspection of an auditing firm in mainland China perhaps occurring before the end of this year.
Since the inception of its non-U.S. inspection program in 2004, the PCAOB said it has conducted inspections in 44 non-U.S. jurisdictions. Where possible, the board seeks 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 U.S. markets. The Act requires the board 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.
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, such as affiliates of BDO, Deloitte, EY and PwC.