
The Public Company Accounting Oversight Board (PCAOB), on Nov. 14, adopted a rule amendment enabling it to respond to situations where a registered firm no longer exists or is operational. It also addresses circumstances where the firm fails to file annual reports and pay annual fees for at least two straight reporting years.
According to the PCAOB, the rule amendment promotes its investor-protection mission and its registration program.
“The amendment adopted today will not only make registration information more useful for investors, audit committees, and other stakeholders, it will also improve the efficiency and effectiveness of our organization,” PCAOB Chair Erica Williams noted. “We thank all the commenters who provided us with valuable perspectives, and we look forward to monitoring the implementation and impact of the amendment.”
Via PCAOB Form 2, registered firms provide the PCAOB with key information, such as each audit client for which that firm issued any audit reports in a reporting period. As of Aug. 31, 2024, 80 registered firms have not filed annual reports or paid annual fees for the 2022 and 2023 reporting years.
These delinquencies hamper the PCAOB from:
• Maintaining an accurate list of registered firms that want to maintain their registrations;
• Ensuring Form 2 data is reported to the public;
• Collecting required annual fees and
• Utilizing PCAOB staff time and resources efficiently.
The amendment establishes a new procedural mechanism allowing the Board, under specified conditions, to:
• Treat a PCAOB-registered firm’s failures both to file annual reports with the PCAOB and to pay annual fees to the PCAOB for at least two straight reporting years as a constructive request for leave to withdraw from PCAOB registration.
• Deem the firm’s registration withdrawn.
After a Feb. 2024 proposal that included the amendment, the Board received feedback from various commenters. While commenters mainly were supportive of the proposed amendment, the PCAOB also made changes to respond to stakeholder feedback. For instance, the February proposal initially contemplated 30 days for firms to email the PCAOB’s Registration staff to halt the withdrawal process. Responding to the feedback, the 30-day period was extended to 60 days.
The amendment is still subject to Securities and Exchange Commission (SEC) approval. If approved by the SEC, the amended rule will be effective at first for annual reports and fees due in 2025. This means that a registered firm that does not file an annual report and does not pay an annual fee for both the 2025 and 2026 reporting years could be deemed withdrawn from registration under Rule 2107(h) starting in the fall of 2026.
More information on the history of this project such as historical documents and comments received, are in Rulemaking Docket 054.