Ethics and governance in the European Financial centers

The Public Company Accounting Oversight Board (PCAOB) a few days ago voted to issue for public comment a proposed policy statement that identifies the factors relevant to “full reliance” by the Board on the inspections systems of its non-U.S. counterparts that are sufficiently rigorous to meet the level of protection for investors that is required by the Sarbanes-Oxley Act of 2002.

Comments are requested by March 4, 2008. I gonna comment on poorly rigorous behaviours based on public and official sources that are the visible part of the iceberg.

Reliance would be based on the level of independence and rigor demonstrated by those entities.

Five broad principles would allow the assessment:

1. Adequacy and integrity of the oversight system – The Board would weigh whether the non-U.S. system effectively works in the public interest to protect investors by seeking to improve audit quality.
2. Independent operation of the oversight system: The Board would weigh whether the entity and the system within which it operates are free from interference or undue influence by the audit practitioners and/or audit firms under the entity’s supervision.
3. Independence of the system’s source of funding: The Board would weigh whether the non-U.S. system has the ability to obtain and deploy the financial resources necessary to carry out its mandate without interference or undue influence by the audit practitioners and/or audit firms under its supervision.
4. transparency of the system: The Board would weigh the extent to which the entity is accountable for the discharge of its duties through a transparent framework. The Board would review whether the entity publicly discloses information on its structure, governance, policies and operations.
5. System’s historical performance: The Board would weigh whether the non-U.S. oversight entity or the system within which it operates has a record of adequate disciplinary proceedings and appropriate sanctions

Big four entities in the small European financial centers may be upset.


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