TheCorporateCounsel.net

Yesterday, the SEC’s Acting Chief Accountant, Paul Munter, issued a statement to say that the SEC & PCAOB are skeptical of alternative audit engagement structures that companies might attempt to use as a workaround to HFCAA compliance. The statement follows the tentative deal that the PCAOB has reached with China-based regulators regarding inspections – and the apparently growing practice of some China-based firms to switch to US-based lead audit firms in an effort to avoid delistings. Here’s the bottom line:

Issuers and accounting firms looking to avoid the uncertainty about whether they will be in compliance with HFCAA may be tempted to engage in an efficient breach of other applicable legal and audit requirements. Such issuers and accounting firms should be forewarned that doing so may well result in investigations and enforcement actions by the PCAOB, the Commission, or both, and that the attendant liabilities may attach not only to the accounting firms and their associated persons, but also to issuers, their audit committees, and officers and directors. Any attempt by issuers or accounting firms to engage in such an efficient breach and avoid the consequences of HFCAA in contravention of other legal and audit requirements should therefore be avoided.

– Liz Dunshee