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CAQ Asks PCAOB Not to Change Funding Rule to Require Audit Firm to File Notice

By Jim Hamilton

One method of funding the PCAO provided by Sarbanes-Oxley is an annual accounting support fee paid by issuers and now broker-dealers. If the issuer is past due with its allocated share of the accounting support fee, then no registered firm is permitted to sign an unqualified audit opinion with respect to the issuer's financial statements or to sign a consent to the use of prior audit opinions for that issuer. However, the funding rules contain a limited exception to this prohibition. An issuer may have a past-due share of the accounting support fee, including possibly through mistake, inadvertence, or confusion, at a time when, in order to access or preserve its ability to access the capital markets in a timely manner, the issuer needs to submit a report to, or make a filing with, the SEC. Under these circumstances, the rules allow the issuer to submit an electronic notice to the Board no later than the next business day after the filing is made with the Commission. The Board is proposing an amendment to Rule 7103(b)(2) to require that the notice be filed by the registered public accounting firm instead of the issuer.

In a comment letter, the Center for Audit Quality (CAQ) opposed the proposed change. Noting that it does not have a clear understanding as to the rationale for changing this reporting requirement, CAQ urged the Board not to make the change. CAQ believes that the filing should remain a requirement of the issuer because it is the issuer that is delinquent with its share of the accounting support fee and that is filing its documents with the SEC. Moreover, a process has already been established with issuers under the existing rule. However, if the Board determines to make the change, CAQ asks that the Board explain its rationale for the change in requirements relative to notifying the Board when an issuer is delinquent on its share of the accounting support fee and an audit opinion or consent has been included in a filing with the SEC.

Full post as published by Jim Hamilton's World of Securities Regulation on February 23, 2011 (boomark / email).