Audit regulators are making more headway in their efforts to regulate overseas audit firms doing business in the United States, striking a new deal that gives greater access to audit firms in Japan.

The Public Company Accounting Oversight Board said it reached a cooperative arrangement with the Japan Financial Services Agency and the Certified Public Accountants and Auditing Oversight Board of Japan to jointly oversee auditors that practice in both jurisdictions. The agreement allows for PCAOB inspectors to conduct on-site visits at firms in Japan that are registered with the board to audit U.S. registrants, and it addresses the exchange of confidential information between the two countries. The cooperation agreement includes sharing information and documents on firms within the regulatory jurisdiction of both regulators, assisting with investigations or inspections, and other ways they will cooperate.

The agreement in Japan extends the PCAOB's regulatory reach into Asia, with similar cooperation or inspection access already established in Korea, Singapore, Malaysia, Thailand, the Philippines, and Taiwan. China, however, remains inaccessible to the PCAOB. The PCAOB and the Securities and Exchange Commission sent a delegation to China this summer to open talks on how the PCAOB can gain access to Chinese firms doing business in the United States, but the delegation returned home only with plans to continue the dialogue.

In the meantime, the PCAOB is taking other measures to make investors aware of where overseas audit work is seeping unregulated into U.S. capital markets. It maintains a list of U.S.-listed public companies whose financial statements are audited by firms that have not been inspected because of legal obstacles. Where overseas firms are contributing to audit work through registered firms, the board is preparing a new rule that would require registered firms to name in their audit reports any outside firm that contribute to the audit work, to give investors some visibility to audit work that may not be regulated directly by the PCAOB.

Rhonda Schnare, director of international affairs at the PCAOB, says the board and staff are working on concluding similar cooperative arrangements with other regulators in other countries. The PCAOB oversees more than 900 audit firms in 84 countries outside the United States that have registered to do business inside the United States.