February 2, 2009
Financial Services Agency
Certified Public Accountants and Auditing Oversight Board

Submission of joint comments from FSA and CPAAOB on the draft on “Rule amendments concerning the timing of certain inspections of non-U.S. firms, and other issues relating to inspections of non-U.S. firms”

On February 2, the Financial Services Agency (FSA) and the Certified Public Accountants and Auditing Oversight Board (CPAAOB) issued a joint comment letter to the Public Company Accounting Oversight Board (PCAOB) of the United States regarding its draft on “Rule amendments concerning the timing of certain inspections of non-U.S. firms, and other issues relating to inspections of non-U.S. firms”.

The Sarbanes-Oxley Act of 2002 of the U.S. requires the PCAOB to conduct inspections once every three years with respect to each registered public accounting firm that regularly provides audit reports for 100 or fewer issuers, regardless of whether they are domestic or foreign.

The PCAOB has invited public comments on the draft change to Rule 4003 that would confer on the PCAOB the ability to postpone, for up to three years, certain inspections of foreign audit firms that are required to be conducted before the end of 2009, as well as on the possible Board action in the event a non-U.S. firm declines to comply with an inspection demand because of a concern that doing so may violate the firm’s local law.

The outline of our comments is as follows:

• We understand the PCAOB’s legitimate intention in the proposed amendments with a view to accessing necessary information held by registered foreign audit firms so as to fulfil its statutory responsibilities of enhancing public interests and investor protection.
• However, we believe it is necessary for a country or jurisdiction to give due consideration to the sovereignty and the national legal and regulatory framework of its counterpart when dealing with cross-border issues.
• When non-U.S. audit firms’ violations of Rule 4006 occur on the basis of non-U.S. legal regulatory restrictions or sovereignty concerns that such firms have no control over, we suggest that the PCAOB closely consult with the competent supervisory authorities of relevant jurisdictions first to find out the background and reasons associated with the violation and seek a better solution.
• The PCAOB may wish to explore an approach moving towards reliance on other audit oversight authorities with a principle of the “home-country based approach”, provided that they are found to be as independent and robust as the Board. Also, the PCAOB may wish to work nationally in order to resolve the difficulties by talking with legislators about changing the Sarbanes-Oxley Act of 2002.

Attachment-1:	Comment letter from FSA and CPAAOB to PCAOB
Attachment-2:	Public consultation document on the proposed rule amendments

The above-mentioned file is in PDF format.
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