The Public Company Accounting Oversight Board has agreed to cooperate with Israeli financial regulators on exchanging confidential information about auditing and accounting firms.

The cooperative agreement between the PCAOB and the Israel Securities Authority aims to improve the supervisory auditors and accountants who operate in each other’s jurisdictions. The arrangement, which was announced Monday, is the first of its kind in the Middle East for the PCAOB, and will enable the board to learn more about the audits of Israeli companies whose securities trade in the U.S.

“With the significant presence of Israeli companies on U.S. exchanges, this agreement with the Israel Securities Authority will better protect U.S. investors,” said PCAOB Chairman James R. Doty in a statement. “It is an important achievement in expanding our cooperative agreements into the Middle East, and I hope that other regulators elsewhere will soon follow.”

The PCAOB has been trying to gain access to auditing firms in China in an effort to inspect the audits of Chinese companies that have gained access to the U.S. public markets through reverse mergers with U.S. shell companies. While the PCAOB has had the ability to conduct inspections in Israel of auditing firms there since 2005, the cooperative agreement to share confidential information will allow it to do a better job of policing audits of Israeli public companies, such as Comverse Technology, which was embroiled in an accounting and stock option backdating scandal several years ago (see Fugitive Ex-CEO Settles Backdating Case for $53.6M). The agreement permits the PCAOB and the ISA to share confidential information about the firms that operate in both jurisdictions.

The agreement was made possible by the passage last year of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permitted the PCAOB to share confidential information with its non-U.S. counterparts under certain circumstances.

“The cooperative agreement with the ISA shows the priority that regulators place on reaching cooperative arrangements for the oversight of auditors,” said PCAOB director of international affairs Rhonda Schnare. “This agreement demonstrates the progress we continue to make in reaching agreements that span the globe, and we are working hard to further these efforts.”

Currently, 18 PCAOB-registered auditing firms are located in Israel, including firms affiliated with Baker Tilly and UHY.

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