PCAOB approves rules for firms that do not regularly issue audit reports
The Board adopted two amendments to PCAOB Rule 4003, which addresses the minimum frequency with which the Board will conduct inspections of different categories of registered public accounting firms.
The amendments approved today would eliminate Rule 4003's requirement that the Board regularly inspect each registered public accounting firm that plays a "substantial role" in audits but does not issue audit reports. The amendments would also eliminate the rule's requirement that the Board inspect each registered public accounting firm that issues an audit report, even if the firm does not regularly issue audit reports.
The amendments would have no effect on the rule's requirements concerning the frequency of Board inspections of registered firms that regularly issue audit reports. At present, more than 800 registered firms fall into that category under the terms of the amended rule. The Board has determined that the focus of its fixed periodic inspection program should be on such firms. The Board nonetheless retains the discretion to inspect any registered firm at any time and so, for example, could decide to inspect a firm that played a substantial role in an engagement based on information the Board learns in inspecting the principal auditor on the engagement. The amendments and the discretionary approach to inspections of firms that play a substantial role reflect the risk-based focus that the Board generally brings to bear in considering the most prudent allocation of its inspection resources.
The amendments will be submitted to the Securities and Exchange Commission for approval pursuant to Section 107(b) of the Sarbanes-Oxley Act.