U.S. and Europe Reach Pact on Auditors

''It's a done deal,'' says PCAOB chairman William McDonough. ''We hope to be able to rely to a great extent on the inspection work of other regulat...
Stephen TaubMarch 26, 2004

The United States and the European Union Thursday took one giant step closer to creating tougher global accounting standards when they worked out a comprehensive plan for overseeing auditing firms, according to Reuters.

Officials told the wire service that they have agreed to a general framework that calls for closer cooperation between supervisors on both sides of the Atlantic, but that “the practical applications will have to be worked out.”

U.S. officials, however, made it clear to reporters that EU auditors working in the United States will have to register with the Public Company Accounting Oversight Board (PCAOB) — a controversial provision that the folks in Europe had opposed until now.

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Asked whether U.S. and EU regulators had clinched a deal, Europe’s internal market commissioner, Frits Bolkestein, reportedly told a news conference: “Yes, I have a feeling there is a deal. Fears of extra-territoriality have been allayed; we can look forward to cooperation with the PCAOB.”

Said PCAOB chairman William McDonough, “It’s a done deal.”

EU authorities had been angered, at first, when U.S. regulators insisted that European audit firms working in the States would be required to register in the States. However, the European Union trotted out a proposal that will set up PCAOB-style oversight bodies in each EU state, according to Reuters, to ensure that accountants there meet U.S. standards.

“We hope to be able to rely to a great extent on the inspection work of other regulators,” McDonough reportedly stated, “and it is in that regard that I especially welcome the establishment of new, independent oversight systems outside the United States.

Under U.S. rules, European auditors will be inspected once every three years by U.S. authorities. As a result, officials told Reuters, the EU and the United States have a couple of years to decide how to carry out the inspections until the new EU system is fully in place.

The PCAOB’s deadline for non-U.S. companies to register is June 19. So far, 801 audit firms are registered with the board, 20 from outside the United States.