[Federal Register Volume 80, Number 27 (Tuesday, February 10, 2015)]
[Notices]
[Pages 7511-7512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02637]
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SECURITIES AND EXCHANGE COMMISSION
Securities Act of 1933, Release No. 9721/February 4, 2015;
Securities Exchange Act of 1934, Release No. 74203/February 4, 2015;
Order Approving Public Company Accounting Oversight Board Budget and
Annual Accounting Support Fee for Calendar Year 2015
The Sarbanes-Oxley Act of 2002, as amended (the ``Sarbanes-Oxley
Act''),\1\ established the Public Company Accounting Oversight Board
(``PCAOB'') to oversee the audits of companies that are subject to the
securities laws, and related matters, in order to protect the interests
of investors and further the public interest in the preparation of
informative, accurate and independent audit reports. The PCAOB is to
accomplish these goals through registration of public accounting firms
and standard setting, inspection, and disciplinary programs. The PCAOB
is subject to the comprehensive oversight of the Securities and
Exchange Commission (the ``Commission'').
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\1\ 15 U.S.C. 7201 et seq.
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Section 109 of the Sarbanes-Oxley Act provides that the PCAOB shall
establish a reasonable annual accounting support fee, as may be
necessary or appropriate to establish and maintain the PCAOB. Under
Section 109(f) of the Sarbanes-Oxley Act, the aggregate annual
accounting support fee shall not exceed the PCAOB's aggregate
``recoverable budget expenses,'' which may include operating, capital
and accrued items. The PCAOB's annual budget and accounting support fee
are subject to approval by the Commission.
Section 982 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act'') \2\ amended the Sarbanes-Oxley
Act to provide the PCAOB with explicit authority to oversee auditors of
broker-dealers registered with the Commission. In addition, the PCAOB
must allocate the annual accounting support fee among issuers and among
brokers and dealers.
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\2\ Public Law 111-203, 124 Stat. 1376 (2010).
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Section 109(b) of the Sarbanes-Oxley Act directs the PCAOB to
establish a budget for each fiscal year in accordance with the PCAOB's
internal procedures, subject to approval by the Commission. Rule 190 of
Regulation P facilitates the Commission's review and approval of PCAOB
budgets and annual accounting support fees.\3\ This budget rule
provides, among other things, a timetable for the preparation and
[[Page 7512]]
submission of the PCAOB budget and for Commission actions related to
each budget, a description of the information that should be included
in each budget submission, limits on the PCAOB's ability to incur
expenses and obligations except as provided in the approved budget,
procedures relating to supplemental budget requests, requirements for
the PCAOB to furnish on a quarterly basis certain budget-related
information, and a list of definitions that apply to the rule and to
general discussions of PCAOB budget matters.
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\3\ 17 CFR 202.190.
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In accordance with the budget rule, in March 2014 the PCAOB
provided the Commission with a narrative description of its program
issues and outlook for the 2015 budget year. In response, the
Commission provided the PCAOB with economic assumptions and budgetary
guidance for the 2015 budget year. The PCAOB subsequently delivered a
preliminary budget and budget justification to the Commission. Staff
from the Commission's Offices of the Chief Accountant and Financial
Management dedicated a substantial amount of time to the review and
analysis of the PCAOB's programs, projects and budget estimates;
reviewed the PCAOB's estimates of 2014 actual spending; and attended
several meetings with management and staff of the PCAOB to further
develop its understanding of the PCAOB's budget and operations. During
the course of this review, Commission staff relied upon representations
and supporting documentation from the PCAOB. Based on this review, the
Commission issued a ``pass back'' letter to the PCAOB. On November 25,
2014, the PCAOB approved its 2015 budget during an open meeting, and
subsequently submitted that budget to the Commission for approval.
After considering the above, the Commission did not identify any
proposed disbursements in the 2015 budget adopted by the PCAOB that are
not properly recoverable through the annual accounting support fee, and
the Commission believes that the aggregate proposed 2015 annual
accounting support fee does not exceed the PCAOB's aggregate
recoverable budget expenses for 2015. The Commission also acknowledges
the PCAOB's updated strategic plan and encourages the PCAOB to continue
keeping the Commission and its staff apprised of developments
throughout the PCAOB's implementation of its near-term priority
projects. The Commission looks forward to providing views to the PCAOB
as future updates are made to the plan.
The Commission is aware that some of the projects on the PCAOB's
standard setting agenda to update auditing and quality control
standards have been slow to advance. The Commission also understands
that the Board intends to undertake a review of performance and
management of the standard setting agenda. The Commission directs the
PCAOB during 2015 to provide timely updates to the Commission's staff
on the Board's evaluation of all aspects of its standard setting
process including performance and management of the process and the
potential actions being considered by the Board for process
improvements. The Commission also directs the PCAOB, upon its
finalization of a process improvement plan for the standard setting
agenda, to include in its quarterly reports to the Commission updates
on the Board's assessment of the improvements in the performance and
management of the standard setting agenda.
Similarly, as part of its review of the 2015 budget, the Commission
notes that the Center for Economic Analysis (``Center''), established
in 2014, requires continued Board oversight to align its activities
with the PCAOB's mission. The Commission directs the PCAOB during 2015
to provide timely updates to the Commission's staff on the activities
of the Center, including with respect to defining its role and aligning
its activities with the Board's mission. The Commission also directs
the PCAOB to include in its quarterly reports to the Commission,
updates on the Board's assessment of the performance of the Center.
The Commission understands that in recent years the PCAOB has taken
significant and productive steps to improve its information technology
(``IT'') program. These steps include IT staffing changes, implementing
stronger IT governance structures, and strengthening Board oversight of
its IT program. Based upon updates provided by the PCAOB, the
Commission also understands that these efforts are ongoing; and directs
the Board to continue to provide in its quarterly reports to the
Commission detailed information about the state of the PCAOB's IT
program, including planned, estimated, and actual costs for IT
projects, and the level of involvement of consultants. These reports
also should continue to include: (a) A discussion of the Board's
assessment of the progress and implementation of the Board actions
mentioned above; and (b) the quarterly IT report that is prepared by
PCAOB staff and submitted to the Board.
The Commission also directs the PCAOB during 2015 to continue to
include in its quarterly reports to the Commission information about
the PCAOB's inspections program. Such information is to include: (a)
Statistics relative to the numbers and types of firms budgeted and
expected to be inspected in 2015, including by location and by year the
inspections are required to be conducted in accordance with the
Sarbanes-Oxley Act and PCAOB rules; (b) information about the timing of
the issuance of inspections reports for domestic and non-U.S.
inspections; and (c) updates on the PCAOB's efforts to establish
cooperative arrangements with respective non-U.S. authorities for
inspections required in those countries.
The Commission understands that the Office of Management and Budget
(``OMB'') has determined the 2015 budget of the PCAOB to be
sequestrable under the Budget Control Act of 2011.\4\ Unless
legislation occurs that avoids sequestration, we expect the PCAOB will
have approximately $1 million in excess funds available from the 2014
sequestration for spending in 2015. As such, the PCAOB has reduced its
accounting support fee for 2015 by approximately $1 million.
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\4\ See ``OMB Report to the Congress on the Joint Committee
Reductions for Fiscal Year 2015'', Appendix page 17 of 17 at: http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration_order_report_march2014.pdf
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The Commission has determined that the PCAOB's 2015 budget and
annual accounting support fee are consistent with Section 109 of the
Sarbanes-Oxley Act. Accordingly,
It is ordered, pursuant to Section 109 of the Sarbanes-Oxley Act,
that the PCAOB budget and annual accounting support fee for calendar
year 2015 are approved.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015-02637 Filed 2-9-15; 8:45 am]
BILLING CODE 8011-01-P