The Public Company Accounting and Oversight Board is continuing to encounter resistance from Chinese authorities in its efforts to gain access to inspecting audit firms in China.

PCAOB chairman James Doty told the American Institute of CPAs’ Conference on Current SEC and PCAOB Developments on Wednesday how the PCAOB has managed to expand its international inspection program in other countries besides China.

“To date, we have carried out inspections in 46 foreign jurisdictions,” he said. “In 18 of those jurisdictions, we conduct our inspections jointly with a local audit oversight body. This enhances our understanding of local risks. It may also provide local authorities the benefit of broader information about firms’ global operations.”

He noted that the PCAOB has received support from the European Commission to work with the authorities in Europe, and while the agreement is up for re-examination next year, he is optimistic the decision will be renewed, “We will continue to deepen our ties with our European partners,” said Doty. “And we will achieve protocols with the shortening list of European jurisdictions where we don’t currently inspect, due to local administrative or legislative hurdles. Greece, Hungary and Luxembourg came off that list this year, when local authorities approved bilateral arrangements between their audit regulators and the PCAOB.”

However, China remains a challenge for the PCAOB, he acknowledged. “We also inspect in Latin America, Canada, Africa, Australia and Asia, but China is an exception,” said Doty. We have been negotiating toward access to inspect in China. We reached a break-through of sorts this past June at the Treasury Department’s portion of the U.S.-China Strategic and Economic Dialogue when China’s State Council for the Chinese securities regulator apparently directed the Chinese regulators to work out terms of a pilot inspection program with us. But coming to closure on the details of this pilot inspection program has unfortunately proven to be significantly more difficult than anticipated.”

Doty also discussed some of the problems the PCAOB is continuing to see within U.S. auditing firms, but he is seeing some positive results from inspections and the Sarbanes-Oxley Act of 2002 that mandated the PCAOB. “In my time at the PCAOB, we have seen changes,” he said. “My arrival coincided with a peak in inspection findings; and remediation was being challenged. With the credibility of the inspection process, remediation has begun to work for the firms who committed to the concept of remediating deficiencies and looking for root causes. Findings are beginning–in those firms–to decline. It is too early to declare victory: but we have established an interactive process that is fair, expertly implemented, and transparent to the firms. This is, I believe, what Sarbanes-Oxley contemplated.”

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