Tip of the Week: Using a Foreign Audit Firm? PCAOB Registration May Not Be Enough
By David Feldman at 26 February, 2010, 8:11 pm
Many folks don’t realize that if a company that is public or going public uses a foreign auditing firm, even if that firm is registered with the US Public Company Accounting Oversight Board (”PCAOB”), if that firm has never filed anything with the SEC, the Commission staff first will require the firm to demonstrate its expertise, competency and knowledge of US accounting principles. So a real simple rule of thumb is, if you are working with a foreign based company that wants to use a locally based auditing firm, check not only that they are PCAOB registered, but that they have previously filed audits with and were approved by the SEC staff as well.
In 2004 guidance put out in part in connection with rolling out Sarbanes-Oxley and PCAOB registration of accounting firms, the SEC noted: ”A foreign audit firm’s registration with the PCAOB does not supercede existing means by which a firm demonstrates its knowledge and experience in applying US GAAP, PCAOB Standards, SEC financial reporting rules, and SEC independence requirements. Foreign auditors are still expected to demonstrate their knowledge and experience..” You can find this at http://www.sec.gov/divisions/corpfin/internatl/cfirdissues1104.htm#P313_42976. This approval generally comes from the SEC Office of Chief Accountant.
So just a little tip for all you professionals involved with international transactions. Have a great weekend all.
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