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US regulator delays inspections of certain foreign firms

The US Public Company Accounting Oversight Board is delaying the 2009 inspection deadline of 49 registered non-US public accounting firms.

An amendment to the audit watchdog’s rules allows it to postpone the first inspection of any foreign-registered public accounting firm that the board was required to conduct before the end of 2009 and that is in a jurisdiction the board had not conducted an inspection in before 2009.

These inspections can be postponed for up to three years.

The rule does not extend the deadline for other non-US inspections currently required this year.

It also does not affect inspection frequency requirements for any other inspections of firms.

Under the Sarbanes Oxley Act, non-US firms registered with the PCAOB must undergo inspections at least once every three years.

The board said the delays took place to allow inspections to occur co-operatively with the watchdog’s non-US counterparts.

The board will conduct the inspections of the 49 firms in question between 2009 and 2012, according to a specific schedule that is prioritised in relation to the market capitalisation of the firms’ issuer clients.

By the end of 2009, the board will inspect firms whose combined audit clients’ US market capitalisation makes up 35 percent of the aggregate US market capitalisation of the audit clients of all 49 firms.

By the end of 2010, the PCAOB will have completed inspections of firms whose clients make up 90 percent of that aggregate market capitalisation.

The PCAOB is also implementing a new transparency measure related to the rule change.

The board will post a list of registered firms that have not had their first inspection, despite more than four years having passed since they first issued an audit report while registered with the board.

PCAOB director of international affairs Rhonda Schnare said these transparency measures will be an important tool for accountability and also inform the public about the status of the board’s international inspection programme.

To date, the PCAOB has conducted 140 inspections of non-US firms in 26 jurisdictions.

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