November 5, 2021
The Securities and Exchange Commission announced that it has approved the Public Company Accounting Oversight Board’s (PCAOB) Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act. Rule 6100 will establish a framework for the PCAOB’s determinations under the Holding Foreign Companies Accountable Act (HFCAA) that the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction.
“This is an important step to protect U.S. investors,” said SEC Chair Gary Gensler. “I believe it is critical that the Commission and the PCAOB work together to ensure that the auditors of foreign companies accessing U.S. capital markets play by the same rules. The Commission adopted interim final rules to implement its required rulemaking under the HFCAA earlier this year. We remain on track to finalize those rules before the end of the year.”
The Sarbanes-Oxley Act of 2002, as amended, mandates that the PCAOB inspect registered public accounting firms in both the United States and in foreign jurisdictions and investigate potential statutory, rule, and professional standards violations committed by registered public accounting firms and their associated persons. The HFCAA requires that the PCAOB determine whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction. PCAOB Rule 6100 establishes the process for the PCAOB’s determinations under the HFCAA; the factors the PCAOB will evaluate and the documents and information the PCAOB will consider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which the Board will reaffirm, modify, or vacate any such determinations.
“The PCAOB’s inspection regime has unquestionably led to improved audit quality,” said SEC Acting Chief Accountant Paul Munter. “With this rule, we can continue the process of ensuring that all publicly traded issuers in our capital markets are complying with the same requirements and that investors can draw the same level of confidence from the quality of the audits of all issuers no matter where their registered public accounting firm is located.”
The Commission’s order approving PCAOB Rule 6100 will be published in the Federal Register. PCAOB Rule 6100 is effective immediately.