The Public Company Accounting Oversight Board (PCAOB) voted Tuesday to propose rules for annual and special reporting of information and events by accounting firms registered with the PCAOB.
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Each registered public accounting firm is required by Section 102(d) of the Sarbanes-Oxley Act 2002 to submit an annual report to the Board and may be required to provide information specified by the Securities and Exchange Commission (SEC) more frequently. The reporting framework proposed by the Board in Rulemaking Docket 019: Periodic Reporting by Registered Public Accounting Firms, addresses both types of reporting obligations. First, the proposal would require each registered firm to provide basic information once a year about the firm and the firm’s issuer-related practice over the most recent 12-month period. Second, the proposal identifies certain events that, if they occur with respect to a registered firm, must be reported by the firm within 14 days.
The PCAOB also voted to propose rules that, in certain circumstances, would allow a successor firm to succeed to the registration status of a predecessor firm following a merger or other change in the registered firm’s legal form. The rules are intended to minimize disruption of a firm’s registration because registration is essential to a firm’s ability to lawfully audit issuers, and an issuer’s compliance with federal law and regulations depends upon its auditor being registered with the PCAOB.
The proposed rules, detailed in Rulemaking Docket 020: Succeeding to the Registration Status of a Predecessor Firm, would allow a firm to succeed outright to a predecessor’s registration in certain circumstances without disruption of the registration status. In other circumstances, the proposed rules would allow for temporary succession for a transitional period of up to 90 days while the firm seeks registration.
The Board seeks comments on the proposed rules for 60 days and will carefully consider all comments received. Following the close of the comment period on July 24, 2006, the PCAOB will determine whether to adopt final rules, with or without amendments. Any final rules will be submitted to the SEC for approval.