Public Company Accounting Oversight Board; Order Approving Proposed Rule and Application Instructions Governing Withdrawal From Registration
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-49694; File No. PCAOB-2003-09)
May 13, 2004
On October 15, 2003, the Public Company Accounting Oversight Board (the "Board" or the "PCAOB") filed a Form 19b-4 with the Securities and Exchange Commission (the "Commission") pursuant to Sections 102 and 107 of the Sarbanes-Oxley Act of 2002 (the "Act"), consisting of a proposed rule and application form completion instructions governing withdrawal from registration (collectively the "proposed rule"). Notice of the proposed rule was published in the Federal Register on April 8, 2004.1 The Commission received one comment letter. For the reasons discussed below, the Commission is granting approval of the proposed rule.
The Act established the PCAOB to oversee the audits of public companies and related matters, to protect investors, and to further the public interest in the preparation of informative, accurate and independent audit reports. The PCAOB is to accomplish these goals through registration, standard setting, inspections, and disciplinary programs.
In furtherance of the registration requirement in Section 102 of the Act, the PCAOB adopted registration rules on April 23, 2003. The Commission approved those rules on August 1, 2003, following a public comment period. The registration rules do not address the process by which a registered public accounting firm may cancel, rescind or withdraw its registration with the PCAOB. Accordingly, the Board published a proposed registration withdrawal rule and related withdrawal application form completion instructions for public comment on July 28, 2003 (PCAOB Release No. 2003-014). The PCAOB revised the proposed rule in response to three letters it received during the comment period. The PCAOB adopted the proposed rule, as revised, and concurrently authorized submission of the proposed rule to the Commission for approval. The proposed rule was filed with the Commission pursuant to the requirements of Section 107(b) of the Act and Section 19(b) of the Securities Exchange Act of 1934 (the "Exchange Act").
The PCAOB has proposed a rule and instructions for completion of an application form (Form 1-WD) to govern the process by which public accounting firms may request leave to withdraw from registration. Under the proposed rule, a registered firm may seek to withdraw at any time by filing Form 1-WD. However, withdrawal from registration is not automatic. The PCAOB may order that withdrawal be delayed while the Board conducts a related inspection, investigation, or disciplinary proceeding. The PCAOB may delay a requested withdrawal for up to 18 months, and, under the rule, that period shall automatically be extended to cover any period necessary to complete a disciplinary proceeding initiated prior to the expiration of the 18-month period.
The proposed rule also provides that, if the PCAOB determines within three years of granting a request for withdrawal that the withdrawal application form contained a material misstatement or omission, the Board may void the withdrawal retroactively. The PCAOB wants to provide a basis for inspecting, investigating and potentially disciplining a registered firm that made a false or misleading statement in its withdrawal application. Because the PCAOB's regulatory authority is greatest over entities registered with the Board, the proposed rule provides that the registration of a suspect firm shall be reinstated, effective from the date of the deemed withdrawal.
While a request for leave to withdraw is pending, the applicant may not engage in the preparation or issuance of, or play a substantial role in preparing or furnishing, a public company audit report, other than to issue consent to the use of an audit report for a prior period. In addition, a firm that has filed a Form 1-WD may not publicly hold itself out as registered with the PCAOB without disclosing that its registration status is "registered - withdrawal request pending."
The American Institute of Certified Public Accountants (the "AICPA") submitted to the Commission a comment letter dated April 29, 2004. The comment letter contains a restatement of the points made by the AICPA in a letter dated August 18, 2003 on the proposed rule released by the PCAOB for public comment on July 28, 2003. The PCAOB gave careful consideration to the comments received from the AICPA and two other commenters in the course of revising the proposed rule prior to its adoption by the Board.
On the basis of the foregoing, the Commission finds that the proposed rule 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.
IT IS THEREFORE ORDERED, pursuant to Section 107 of the Act and Section 19(b)(2) of the Exchange Act, that the proposed rule (File No. PCAOB-2003-09) be and hereby is approved.
By the Commission.
J. Lynn Taylor