Weak Accounting Firms Targeted by PCAOB and Swiss Regulator Pact
Accounting firms in Siwtzerland will start seeing tighter oversight from the Swiss Federal Audit Oversight Authority and Financial Market Supervisory Authority as the two regulators inked a pact with the Public Company Accounting Oversight Board in USA to establish supervisory framework.
The signing of the Statement of Protocol by the regulators came on the heels of US Senator Jack Reed’s call for the accounting firms to make it clear whether their audit system still contains ‘systematic weaknesses’ even after the financial crisis.
Reed raised concerns that failing to address such weaknesses might jeopardize the financial reporting of companies.
The pact between the Swiss regulators and PCAOB will enable them to carry out joint inspections of accounting firms in the country that audit companies trading their securities in US markets.
The Statement of Protocol also contains provisions that allow for sharing of confidential information between PCAOB and its non-US counterparts in specified instances. The provision is based on the recent amendment made to the Sarbanes-Oxley Act permitting PCAOB to share such information.
PCAOB Chairman James Doty said his team is expecting for a cooperative work with the Swiss FAOA and FINMA to better protect investors, acknowledging the fact that Switzerland nests several companies whose impact on US and global markets is significant.
Rhonda Schnare, PCAOB Director of International Affairs, said PCAOB is underway towards establishing similar agreement with its counterparts in other countries.
Under the Sarbanes-Oxley Act, PCAOB has the jurisdiction to regularly monitor accounting firms that audit companies whose securities are traded in US markets.
The Sarbanes-Oxley Act directs the PCAOB to oversee and periodically inspect all accounting firms that regularly audit companies whose securities trade on U.S. markets.
There are more than 900 accounting firms currently registered in PCAOB that are based out of USA, 8 of them being located in Switzerland.