The Public Company Accounting Oversight Board has adopted rules requiring public accounting firms to submit reports at least once a year on fees, disciplinary actions and other information that will be posted on the PCAOB Web site.
Each of the more than 1,800 public accounting firms registered with the PCAOB must provide basic information about audit reports issued by the firm during the year and the disciplinary history of people who have joined the firm during that time. They must also report information about fees billed to public company audit clients, in various categories of services, as a percentage of the firm's total fees billed.
Firms may also need to submit special reports in addition to the annual report. If a special event occurs, such as a change of name or contact details, or if the auditor withdraws an audit report and the client hasn't reported that fact in an 8-K filing with the Securities and Exchange Commission, the information must be reported within 30 days to the PCAOB. The need for a special report can also be triggered if certain types of legal, administrative or disciplinary proceedings are instituted against the firm or certain categories of individuals at the firm.
The new rules stem from requirements of the Sarbanes-Oxley Act of 2002 but have taken several years for the PCAOB to draw up. They are subject to the approval of the Securities and Exchange Commission and will take effect within 60 days of approval. Once the SEC approves the final rules, the first reports won't be due for at least another 90 days. For all firms, the first annual report, for the 12-month period ending March 31, 2009, will need to be filed by June 30, 2009.
The reporting requirement for firms may well expand in the future. "With this foundation in place, the board can also, in the future, add other reporting and disclosure obligations that may appropriately serve the public interest," said PCAOB chairman Mark Olson (pictured) in a statement.
The reports will be posted on the PCAOB Web site, like the inspection reports of audit firms that the PCAOB itself conducts. Unlike the inspection reports, the reports won't be edited to excise information such as the names of clients, but there will be exceptions for information that satisfies specified criteria for confidential treatment.
The PCAOB plans to publish guidance to help firms comply with the new reporting requirements and to help them use a new Web-based system that will be made available for submitting the reports. Forms will be available on the site for submitting the annual and special reports.
"We appreciate that the PCAOB contemplates issuing practical, plain English guidance that will help firms, and particularly smaller firms, navigate the board's new Web-based reporting system," said Cindy Fornelli, executive director of the Center for Audit Quality, in a statement.
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