Bucking overseas opposition, the new U.S. accounting oversight board Tuesday proposed rules that would require both foreign and domestic accounting firms to register with the board if they intend to audit the books of companies that sell stock in the United States.
The Public Company Accounting Oversight Board, in a meeting at its Washington headquarters, voted 4 to 0 to put the proposed rules through a 45-day public comment period, after which they would be submitted to the Securities and Exchange Commission for final approval.
The action is a first step by the board, established by Congress in July, to define its oversight of the accounting industry. It sets up potential conflicts with foreign accounting firms and regulators over how far U.S. regulatory authority should extend.
European Union officials have objected to non-U.S. accounting firms having to register with the board.
"The foreign accounting firms are very upset about this because it will mean double regulation for them and also would mean regulation by somebody that they don't know anything about," said Edward Fleischman, a former Republican SEC commissioner whose law firm represents foreign accountants.
Congress created the oversight board to replace a system of peer review after accounting scandals at Enron Corp., WorldCom Inc. and other companies. The law gives the board the power to register foreign accounting firms, while allowing the firms to ask to be exempted from the regulation.
"I have honestly not heard any argument that would convince me that wholesale exempting foreign auditors, who perform audit work for companies traded in the U.S. markets, from this board's oversight would in any way serve the mission charged to us," said board member Kayla Gillan.
Board member Daniel Goelzer said the panel has been discussing the issue for several months, so it is not a reaction to accounting problems at Royal Ahold, the Dutch supermarket firm whose U.S.-traded shares crashed last week after it revealed that it had overstated earnings at its U.S. Foodservice unit.
Also Tuesday, the SEC set procedures for picking a new accounting board chairman to avoid a repeat of the debacle that followed the choice of former FBI Director William Webster.
Bloomberg News and Reuters were used in compiling this report.