PCAOB strikes deals with Belgian and French audit overseers

The Public Company Accounting Oversight Board agreed on a new cooperative arrangement with Belgium’s audit regulator and renewed a similar pact with France’s regulator, expanding its reach across Europe.

The PCAOB’s agreement with the Belgian Audit Oversight College, also known as CTR-CSR, announced Tuesday, will enable the two organizations to cooperate on audit firm inspections and investigations and is the final one the PCAOB needed to probe PCAOB-registered accounting firms in Europe that audit public companies traded on U.S. markets. Last week, the PCAOB renewed an existing agreement with the French audit regulator, Haut Conseil du Commissariat aux Comptes, also known as H3C. The PCAOB also entered into agreements addressing transfers of personal data to the PCAOB with both the Belgian audit regulator and the French regulator.

Now that the Belgian agreement has been signed, the PCAOB has the ability to inspect and investigate all PCAOB-registered accounting firms located in European countries that issue audit reports for public companies listed in the U.S. capital markets. “The cooperative agreements we have in place with our European counterparts reflect the depth of transatlantic cooperation we have enjoyed over the years and highlight our mutual commitment to independent audit oversight, investor protection and transparency in the capital markets,” said PCAOB chairman William Duhnke in a statement.

Courtesy of the PCAOB

Under the Sarbanes-Oxley Act of 2002, the PCAOB is tasked with overseeing and inspecting accounting firms that audit U.S. public companies and brokers and dealers. Around 850 audit firms registered with the PCAOB are outside the U.S. in 92 jurisdictions. The PCAOB works with audit regulators in foreign jurisdictions and signs deals like the ones with the French and Belgian regulators in accordance with their countries’ laws.

China challenges continue

However, the PCAOB is continuing to face challenges in inspecting auditing firms in mainland China and Hong Kong, even though 16 PCAOB-registered firms audited nearly 200 companies there last year. The PCAOB and Chinese authorities signed a memorandum of understanding in 2013, but negotiations broke down during the Trump administration and tensions have continued in the Biden administration.

Congress passed a law late last year that would subject public companies in China to the threat of delisting from U.S. markets if they don’t allow audit inspections for three years in a row. The PCAOB posted information about its challenges in conducting inspections of Chinese auditing firms, along with its international cooperation arrangements.

A Chinese securities regulator blamed the U.S. for the standoff. “As for specific ways for PCAOB to check Chinese accounting firms, we believe we have provided workable proposals that can meet PCAOB demands and China’s national security requirements,” said Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, during a panel discussion Monday, according to the South China Morning Post. “We had sent over the latest version on Aug. 4 last year about a joint review with the PCAOB, but unfortunately, the atmosphere in the U.S. since the U.S. presidential election has not been favorable for China-U.S. cooperation. And we haven’t received a reply from the PCAOB over whether our proposal is suitable or not. We have been sending an email every month since last August, but they just didn’t reply to us.”