The quest to ensure audit quality cannot stop at the U.S. border but must instead be an international effort that stretches to the farthest reaches of the Earth, according to Claudius Modesti, the director of Enforcement and Investigations at the Public Company Accounting Oversight Board.

Modesti, speaking at the FAE's SEC Conference on Oct. 25, said that the PCAOB is going global to inspect firms in other countries and that cross-border audits is one of its main areas of focus—the others being professional skepticism, auditor independence, and integrity of board processes.

He noted that in many cases the audit of a globally oriented client will involve multiple auditors, which carries unique risks. In order to address these risks, the PCAOB has worked to develop cooperative agreements with its regulatory counterparts in other countries to allow them to inspect firms that serve U.S. issuers. Since 2007 the PCAOB has forged such agreements with 24 countries, with Finland and Germany being the most recent. Modesti said that inspection results of some of these non-U.S. audit firms have been less than impressive. 

"So we sanctioned the firm. We barred them, barred the partners, suspended the affiliated firm here in New York and there's a range of sanctions across individuals and partners," he said. 

Modesti also brought up a recent action against BDO Spain. The company, according to the PCAOB, had been the subject of two separate disciplinary proceedings brought on by the country's own audit regulator, something that PCAOB rules require to be reported on its Form 3 within 30 days of becoming aware of these developments. While BDO Spain became aware of them in 2012 and 2014, respectively, it did not file a Form 3 reporting the proceedings until May 2015. 

"If the firm has a regulatory proceeding, it needs to disclose that on its Form 3. Pretty straightforward. Look at the instructions, not very complicated," Modesti said. When the PCAOB discovered, though, that BDO Spain did not comply with those instructions, "we censured them, required them to take remedial measures and imposed a penalty," he said. 

The enforcement director said that he expects more cases involving failure to file a Form 3 in a timely fashion to come up in the future, saying that this is a "fairly persistent problem" he has seen in companies. 

Modesti stressed the importance—here and abroad—in making sure that there is a real deterrent effect that comes with the board's actions. He said that when he worked for the Securities and Exchange Commission in the 1990s, he would see people admit to criminal misconduct and then pay a fine to settle the matter civilly and not admit to the conduct that brought them there in the first place. He said he always scratched his head at this, particularly after he left the SEC and became a criminal prosecutor. It's not a deterrent, he said, if all a corporation has to do is sign a check. 

"The corporation can always write the check," he said. "Overall, the system only works if those who go off the rails get held to account, and that comes down to the individual," he said. 

In this respect, he said that the PCAOB looks for cases where there's recidivism, or cases that can send a particular important message to the public. He stressed the importance of making sure investors and the audit profession what is happening and what needs to be fixed.