PCAOB inspects E&Y's London offices

The PCAOB reportedly began inspections of Ernst & Young's London offices last month. Inspectors spent two weeks in the offices and have scheduled another visit for this month. Other London branches of U.S. accounting firms will also be or have been inspected. The ostensible reason is the little-known provision of Sarbanes-Oxley that requires the PCAOB to provide annual reports detailing operations of foreign audit firms with more than 100 clients listed in the U.S. This has not gone over well in London where there is considerable fear of what has been called "regulatory creep." The fear that Sarbanes-Oxley inspired rules will somehow migrate to Europe has yet to die. In fact, the United Kingdom's economic secretary to the Treasury has proposed a law that would give the Financial Service Authority, the key financial regulator, the power to reject new rules imposed on U.K. exchanges. This comes amid the Nasdaq's move to possibly control the London Stock Exchange and follows news that Euronext would create a "Dutch shield" to assuage fears that it would embrace Sarbox.

For more on the proposed law:
- Here's a BBC article
For more on the inspections:
- Here's a Financial Times article via msnbc.com