Public companies, whether located in the United States or abroad, access U.S. capital markets by complying with certain U.S. legal requirements, including the requirement to periodically file audited financial statements with the U.S. Securities and Exchange Commission. Under the Sarbanes-Oxley Act of 2002, the auditor of those financial statements – whether a U.S. auditor or a non-U.S. auditor – must be registered with the Public Company Accounting Oversight Board and must undergo regular PCAOB inspections to assess their compliance with U.S. law and professional standards in connection with those audits.
PCAOB inspections regularly identify deficiencies in firms' audits and in their quality control procedures. Well before the PCAOB issues an inspection report, inspections often result in firms performing additional procedures that should have been performed at the time of the audit, and those procedures have often led to the audited company restating its financial statements. In addition, through the quality control remediation portion of the inspection process, inspected firms identify and implement practices and procedures to improve future audit quality.
Because of the position taken by certain non-U.S. authorities, the PCAOB currently is prevented from inspecting the U.S.-related audit work and practices of PCAOB-registered firms in certain European countries, China, and – to the extent their audit clients have operations in China – Hong Kong. [1] As a result of these obstacles, investors in U.S. markets who rely on those firms' audit reports are deprived of the potential benefits of PCAOB inspections of these auditors. For the information of those investors and potential investors, the PCAOB publishes a list identifying each issuer whose PCAOB-registered auditor is located in a jurisdiction where obstacles to PCAOB inspections exist. The current list is derived from annual reports on Form 2 filed with the PCAOB by registered public accounting firms in 2010 and 2011 which, in combination, encompass audit reports issued by the firms in the period from April 1, 2009 to March 31, 2011.
The list is set out in two formats – one organized alphabetically by issuer, and one organized by jurisdiction and auditor. [2] (See both lists in the links to the right under Related Information.) The list is limited to issuers for which auditors in the relevant jurisdictions reported having issued audit reports. Auditors in those jurisdictions, however, including the auditors identified in the list, may play a substantial role in the audits of numerous multi-national issuers not listed here. Even though these auditors do not issue audit reports for those issuers, the audit work they perform is relied upon by the issuer’s principal auditor, in the U.S. or elsewhere. That work is often significant to the audit of the financial statements the multi-national issuer files with the SEC and would also be within the scope of PCAOB inspections.