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At the Senate committee meeting, Cox referred to the Public Company Accounting Oversight Board's Auditing Standard No. 2 and said, "We're going to be aggressively working on implementation with the PCAOB so that we get all the benefits without the needless costs." Do you think the SEC's response will be further pressure on excessive audits?
The problem has stemmed from the language and interpretation the PCAOB has given to Audit Statement No. 2. The accounting profession tried to get clarification, but it was unable to get that. Now, I think everybody realizes that clarification would be exceedingly valuable. I think we now may get to see it. I think Chairman Cox' suggestion of trying to work closely with the PCAOB is exactly the kind of SEC leadership that will produce a workable solution.
A major topic during Cox's Senate testimony this week was the question of whether the U.S. regulatory environment is driving companies overseas. What's your reaction?
I think it is to some extent. [But] the fact is that dynamics in the marketplace are making the issue of where a company has its stock listed largely irrelevant. What's much more relevant is who owns it. What we've seen is that the Sarbanes-Oxley standard is effectively becoming the de facto world standard and therefore, I'm less concerned that we're going to lose listings. I agree [with Chairman Cox that] we should not have a race to the bottom.
We can apply the principle of convergence in the Sarbanes-Oxley area just the way we're doing with international accounting standards. The SEC has said that companies eventually will not be required to reconcile accounting statements based on IFRS, the international standards, with GAAP, because we've concluded that IFRS is working toward coming up with standards that are quite good.
Lots of companies are becoming subjected to standards [like 404], whether or not their stock is listed in the U.S. I think we'll continue to see that, particularly when you get developments like Nasdaq acquiring up to 15 percent of the London Stock Exchange. It's going to be very, very hard to imagine that the London Stock Exchange is going to have different standards from those that are going to be applied with respect to Nasdaq. I'm optimistic that we are headed toward a global standard for governance and transparency. All things considered, I think that's a good thing.
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