Accounting firms that audit publicly held U.S. companies knew it was coming. Now they have a date. All public accounting firms must register with the Public Company Accounting Oversight Board by October 22 to stay in the auditing business.
The Securities and Exchange Commission (SEC) approved the deadline date this past Wednesday, paving the way for the PCAOB to require all accounting firms that audit public companies to register.
"This is a seminal event for the PCAOB" said Board Chairman William J. McDonough. "Registration is the underpinning of the Board's duties to oversee and inspect public accounting firms, as well as the Board's duty to enforce the auditing standards that will help restore public confidence in financial reporting."
The SEC approved the Board's deadline in spite of complaints from the country's largest accounting firms and the American Institute of Certified Public Accounts (AICPA), whose role in the standards-setting business has been diminished by the advent of the PCAOB.
The SEC dismissed these concerns by falling back on the Sarbanes-Oxley Act, which required an audit firm registry, stating, "After careful review of the board's proposed registration system, the Commission finds that it is consistent with the requirements of the Act and the securities laws and is necessary and appropriate in the public interest and for the protection of investors."
Foreign firms that audit U.S. firms will also have to register, a hotly contested portion of the SEC's approved action. The Commission did agree to give foreign firms more time to register and will subject them to a different set of rules. The SEC acknowledged and commended the Board's efforts to include registration of foreign firms, despite foreign concerns over regulatory boundaries.
One day after the Securities and Exchange Commission approved the proposed registration rules for the Public Company Accounting Oversight Board, the entity created by the passage of Sarbanes-Oxley, launched its registration system for public accounting firms and its application fee structure.
The Act directs the PCAOB to "assess and collect a registration fee - from each public accounting firm, in amounts that are sufficient to cover the costs of processing and reviewing applications."
The fee schedule is tiered according to the number of issuer clients for which an accounting firm performed audits in the preceding fiscal year, as represented in the firm's application. The Board determined to have the fee vary with the scope of a firm's audit practice because the burden associated with reviewing and processing an application of a firm with a larger audit practice, which will file a larger application, will be greater than that for a firm with a smaller audit practice.
0 clients - $250
1-49 clients $500
50-100 clients - $3,000
101-1,000 clients - $29,000
1,001 clients and up - $390,000
Firms applying for registration must complete and submit Form 1, available on the board's Web site at http://www.pcaobus.org