[Congressional Record Volume 150, Number 137 (Monday, December 6, 2004)]
[Extensions of Remarks]
[Page E2148]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    NEW RULES APPROVED BY THE PCAOB

                                 ______
                                 

                          HON. JOHN E. SWEENEY

                              of new york

                    in the house of representatives

                        Monday, December 6, 2004

  Mr. SWEENEY. Mr. Speaker, under the Sarbanes-Oxley Act (Section 
106(a)) any foreign accounting firm that audits an issuer of securities 
in the United States capital markets shall be subject to the same 
regulatory framework applicable to domestic accounting firms. The Act 
requires that foreign audit firms must adhere to the same rigorous 
standards applicable to domestic firms.
  Sarbanes-Oxley also established the Public Company Accounting 
Oversight Board (PCAOB) and directs them to conduct a continuing 
program of inspections of registered public accounting firms and to 
investigate alleged violations of the Act, related securities laws, and 
auditing and related professional practice standards.
  The PCAOB recently approved rules under which non-U.S. regulators 
would be permitted to fulfill the inspection and enforcement mission of 
the PCAOB if the non-U.S. regulator is judged by the PCAOB to be 
sufficiently independent and rigorous. What concerns me is that the 
PCAOB might allow the Canadian Public Accountability Board to fulfill 
this mission. This would be a serious mistake.
  The PCAOB in looking at its own structure and mission identified five 
factors as bearing upon the independence and rigor of the non-U.S. 
regulatory systems: (1) The adequacy and integrity of the non-U.S. 
system; (2) the system's source of funding; (3) the system's 
independence from the accounting profession; (4) the system's 
transparency; and (5) historical performance.
  The first looks at the system's authority to inspect, investigate, 
sanction and enforce professional standards of the accounting 
profession.
  The second assesses the accounting profession's authority over the 
governance and operation of the non-U.S. regulatory system. How many 
accountants have decision making authority? Are they appointed by 
government? Does the government or the accounting profession hold 
removal power?
  The third implicates the accounting profession's control over the 
system's source of funds.
  The fourth on transparency requires open rule making procedures and 
periodic reporting to the public.
  With respect to historical performance--if the system is new the 
PCAOB will not consider this factor.
  Consequently, any decision by the PCAOB to rely on a specific non-
U.S. regulator should require that they pass these minimum tests. The 
Canadian Public Accountability Board fails these tests.
  The Canadian Public Accountability Board has no direct statutory 
authority. It has no oversight mechanism, no transparency, and no 
public interest accountability. It is subject to the whims of its 
membership and its governing structure is comprised primarily of 
accountants. Most importantly, the source of funding for the Canadian 
Public Accountability Board is in fact the accounting industry itself.
  As the PCAOB moves toward granting reciprocity to foreign 
organizations to help enforce Sarbanes-Oxley the Congress will be 
watching to make certain that the interests of the American investors 
and the integrity of the U.S. financial sector are protected.

                          ____________________