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The SEC requested comment on a Public Company Accounting Oversight Board ("PCAOB") proposed rule that would implement the Holding Foreign Companies Accountable Act (the "Act") by requiring disclosure as to whether an issuer's registered public accounting firm is located in a foreign jurisdiction that prevents the PCAOB from conducting audit inspections.
As previously covered, the Act applies to a "foreign issuer," under SEA Rule 3b-4 ("Definitions of 'foreign government,' 'foreign issuer' and 'foreign private issuer'") that is subject to periodic reporting under the Exchange Act.
To fulfill the statutory mandate, the PCAOB adopted a framework under PCAOB Rule 6100 to make a determination as to whether it cannot inspect a registered public accounting firm because that firm is located in a noncompliant jurisdiction. Rule 6100 establishes the factors that warrant a determination, including whether PCAOB can (i) select any audit area to investigate, (ii) timely access any relevant firm documents for the investigation and (iii) carry out its mandate under the Sarbanes-Oxley Act and its own rules.
Pending SEC approval, the proposed rule will go into effect 45 days following its publication in the Federal Register. Comments on the proposed rule must be received by October 19, 2021.
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