PCAOB adopts rules for HFCAA determinations

The Public Company Accounting Oversight Board has adopted a new rule to give it a framework on how to determine when it can’t inspect foreign accounting firms.

The rule, originally proposed in May 2021, came in response to the Holding Foreign Companies Accountable Act, which requires the board to determine whether it can’t inspect or investigate a registered public accounting firm located in a foreign jurisdiction due to the actions of the authorities in that jurisdiction.

The new rule sets out:

• The manner of the board’s determinations;
• What the board will evaluate and the documents and information it will look at to assess whether a determination is needed;
• The form, public availability, effective date, and duration of those determinations; and,
• How the board will go about reaffirming, modifying or vacating its determinations.

“The rule we adopt today exemplifies our strong and long-held belief that investors benefit from robust international regulatory cooperation and a level playing field for audit oversight in U.S. capital markets,” said PCAOB acting chair Duane DesParte in a statement. “This rule will promote transparency and consistency in the processes that support fulfillment of the board’s responsibilities under the HFCAA.”
While the rule has been adopted by the PCAOB, it is subject to approval by the Securities and Exchange Commission. Once approved, it will become effective immediately.