The PCAOB's Second Inspections of Foreign Auditors

Eric R. Brisker, PhD, and Myungsoo Son, PhD, and Hakjoon Song, PhD, CPA

Section 106(a) of the Sarbanes-Oxley Act of 2002 (SOX) requires foreign auditors that audit U.S. issuer clients to register with the PCAOB and to be inspected in the same manner as U.S. auditors. The PCAOB began inspecting foreign auditors in 2005; by the end of 2012, it had conducted inspections in 40 non-U.S. jurisdictions. In addition, 911 (39%) of the 2,363 audit firms registered with the PCAOB were foreign auditors, according to the board's 2012 annual report. At the end of 2012, all foreign auditors were triennially inspected small auditors with 100 or fewer issuer clients that had been inspected at least once every three years by the PCAOB.