Sign up! PCAOB outlines firm registration guidelines
by Ken Rankin
Washington - The Public Company Accounting Oversight Board voted to require registration of all public accounting firms - foreign as well as domestic - as a prerequisite for issuing audit reports on U.S. corporations. The vote agreed to be flexible with non-U.S. accountants, providing foreign auditors an additional 180 days to comply with the new guidelines.
Firms bracing for PCAOB fee structureWashington - The Big Four and other major firms will pay heavily for the privilege of being regulated by the new Public Company Accounting Oversight Board, thanks to a sliding-scale fee plan being developed by the board in order to generate income from the audit firms that it registers.
The extra six months would allow U.S. regulators to resolve a series of prickly compliance concerns raised by foreign auditors and government officials, PCAOB member Daniel L. Goelzer said during a meeting in late April at which the board approved the rules.Although he joined the other three PCAOB members in approving plans for requiring registration of non-U.S. accounting firms, Goelzer characterized that issue as “the most controversial matter that the board has dealt with during the past four months.”
“We must be prepared to work with our foreign counterparts to find ways to accomplish our goals without subjecting foreign firms to unnecessary burdens or conflicting requirements,” he said. “The proposed 180-day deferral of foreign firm registration will afford us the opportunity to explore ways of accomplishing that goal with non-U.S. accounting oversight bodies.”
Acting chairman Charles D. Niemeier agreed that the registration of foreign firms is one of the “very hard issues” facing the board, but concluded that “our mandate to protect investors” under the Sarbanes-Oxley accounting reform law left the PCAOB with no justification for exempting non-U.S. firms.
While he acknowledged the “need to avoid unnecessary administrative burdens on public accounting firms arising from the oversight of multiple jurisdictions,” Niemeier said, “I firmly believe that auditors who participate in the preparation or issuance of audit reports for U.S. issuers should be governed by the same rules and oversight requirements.”
The board did leave a bit of wiggle room for foreign audit firms that find themselves subject to home-country legal restrictions that prohibit them from disclosing information sought by the PCAOB.
In response to concerns raised by non-U.S. accountants during a “roundtable meeting” with PCAOB members earlier this spring, the board said that it would allow accountants to withhold information if they could document that disclosure would violate non-U.S. laws.
The board’s new registration rules - which are still subject to approval by the Securities and Exchange Commission - also include provisions that:
● Entitle accounting firms to a hearing before the PCAOB if the board determines that the registration application is inaccurate or incomplete;
● Confirm that the information in these registration applications will be made publicly available “as soon as practicable” after the board approves or rejects them;
● Allow both foreign and domestic firms to request “confidential treatment of any portion of an application that contains non-public personal or proprietary information;”
● Eliminate a controversial requirement in the proposed version of the rule that would have required accounting firms to provide additional financial information about their revenue sources; and,
● Narrow the types of criminal, civil and administrative proceedings that accounting firms must disclose in their registration applications.
Under the timetable established by the PCAOB, an electronic “Web-based” registration system is expected to be ready to receive applications from accounting firms “in late June or early July 2003.” Domestic firms that wish to audit U.S. companies will have until “approximately October 24, 2003,” to complete the registration process, while foreign firms will have until “approximately April 26, 2004.”