The Public Company Accounting Oversight Board voted to issue for public comment a proposed policy statement that would allow it to rely on audits done by oversight bodies abroad on non-U.S. firms.

The proposed policy statement identifies the factors relevant to "full reliance" by the PCAOB on the inspections programs systems of its non-U.S. counterparts that are sufficiently rigorous to meet the level of protection for investors that is required by the Sarbanes-Oxley Act of 2002.

"The PCAOB recognizes that cross-border cooperation is fundamental to strengthening audit quality globally," said PCAOB Chairman Mark W. Olson in a statement. "The policy statement provides the architecture for the PCAOB to increase its reliance on the inspections of foreign counterparts, including our colleagues in the European Union."

The proposed policy statement provides guidance on the PCAOB's Rule 4012 (Inspections of Foreign Registered Public Accounting Firms), which allows the board to adjust its reliance on the inspections of auditor oversight entities located in the home countries of registered non-U.S. audit firms, based upon the level of independence and rigor of those entities. 

The PCAOB noted that in the past three years, it has relied to a certain extent on auditor oversight entities in several jurisdictions and has observed an evolution in auditor oversight around the world to include shared objectives with the PCAOB, such as investor protection, improved audit quality and effective oversight of firms. The PCAOB believes it is time to consider increasing its level of reliance on non-U.S. oversight systems where possible.

The proposed policy statement, "Guidance Regarding Implementation of PCAOB Rule 4012," articulates several criteria that define the principles in Rule 4012.  If the criteria are met, the board may place full reliance on the inspection programs of qualified non-U.S. auditor oversight entities. The PCAOB is looking for public comment on the criteria and the approach described in the policy statement.

The principles include the adequacy and integrity of the oversight system, the independent operation of the oversight system, the independence of the system source of funding, the transparency of the system, and the system's historical performance. Comments are requested by March 4, 2008.

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