The Public Company Accounting Oversight Board adopted two separate sets of rules this week: rules on investigations and adjudications, and a rule on the process by which a registered public accounting firm may seek to withdraw from registration. The rules will be submitted to the Securities and Exchange Commission for approval pursuant to Section 107 of the Act. The Board's proposed rules will not take effect until approved by the Commission.
Investigations and Adjudications
On July 28, the Board proposed, and published for comment, an extensive set of rules on investigations and adjudications. Consistent with the Board's responsibility and authority under Section 105 of the Sarbanes-Oxley Act, the Board's proposal set out rules designed to govern, and to provide fair procedures for, the conduct of investigations, the conduct of hearings, and the imposition and termination of sanctions.
The Board received 17 comment letters on the proposal, including letters from accounting firms, individual accountants, professional associations, the National Association of State Boards of Accountancy and the American Bar Association. As a result of the Board's consideration of the comments, the final rules differ from the proposed rules in several respects. In addition, the Board clarified various points in the section-by-section analysis that accompanies the rules.
Withdrawal from Registration
The Board also approved a rule that supplies procedures by which a firm, once registered, may seek to withdraw from registration. Under the rule, a registered firm may seek to withdraw its registration by filing a request with the Board on Form 1-WD. A firm that files a Form 1-WD may not engage in the preparation or issuance of, or play a substantial role in the preparation or furnishing of, an audit report unless it first withdraws its Form 1-WD filing.
Withdrawal is not automatic upon request. The rule delays a firm's withdrawal if certain disciplinary proceedings are pending and, in other circumstances, allows the Board to delay withdrawal for up to 18 months. If withdrawal is delayed, the rule nevertheless eases the firm's reporting and annual fee obligations during the delay. Moreover, the rule gives the Board discretion to waive any regular inspection of the firm that would otherwise commence, in the regular inspection cycle, during the delay.
More information on investigations and adjudications, and withdrawal from registration is available on the Board's Web site: http://www.pcaobus.org under Rules.