Office of the Chief Accountant

While the process employed by OCA staff to address accounting, auditing and auditor independence issues often varies based on the complexity of the issue, available resources, or registrant time constraints, among other variables, the following is a description of a typical process.

Submissions received into the Accounting Group or the Professional Practice Group generally are assigned to a team of OCA staff members. The team members are usually staff members who have experience and knowledge about the topics the company will be discussing with the staff. One staff member is designated the team leader. This person will be the point of contact for all discussions with OCA related to this specific issue, including inquiries about the status of the staff's deliberations. Generally, the team leader will contact the company within 3 days of receiving the submission.

Each team member will read the submission and related accounting or auditing literature. A search of the accounting or auditing literature will be performed to ensure that all relevant references are discussed in the submission. The team will also consider how OCA has previously addressed similar accounting or auditing issues to see if a precedent has been set for the issue at hand or if there is a past decision to which the current issue may be analogized.

The team will exchange preliminary views and will usually create a list of remaining questions for the company and its auditors. The team leader typically will call the company to set up a conference call to discuss the questions and solicit answers. OCA often requests the auditor's contact person also be on the conference call in order to facilitate a comprehensive discussion and the staff's understanding of the technical issues.

During this conference call, the company can expect the team leader to ask someone from the company to briefly explain the issue in order to bring focus to the call. The team will then ask questions and engage the participants in a discussion of factors they see as critical to the analysis, as well as give the company a chance to explain the recommended accounting treatment or auditing resolution. As a result of this call, the company may be asked to prepare additional written correspondence for the staff, perhaps to provide answers to additional questions, to document a complex response that is better understood on paper, or to submit requested items, such as internal financial analyses or relevant presentations to the board of directors or audit committee members. A timely submission of additionally requested items is critical to moving the consultation forward.

If an issue is answered by the accounting or auditing literature or is not unusual, novel or controversial, and is resolved by mutual agreement of the staff and the registrant, then OCA's review usually would end after discussing the issue with the Senior Associate Chief Accountant. If not, the team members may discuss the issue with the Deputy Chief Accountant–Accounting or the Deputy Chief Accountant–Professional Practice.

The team may consult with the staff of the Financial Accounting Standards Board, the PCAOB or national office staff of several non-participating public accounting firms to gather outside opinions and interpretations of the specific issue being addressed. During such consultations, the name and identifying characteristics of the company and transaction are concealed so as to maintain confidentiality. The information gathered during these discussions is only one element in the staff's decision-making process.

Once a decision has been made as to the appropriate resolution for the accounting, auditing or independence issue, the company will be contacted by phone to communicate the staff conclusion and basis thereof. At this point, the company may wish to request a review of the OCA staff accounting, auditing or independence conclusion by the Chief Accountant, which is often accomplished through an in-person meeting between the company and the staff. The company should inform the team leader if it wishes to request such a review.

A company can expect approximately three weeks to pass between receipt of a submission and delivery of a conclusion. Expect more time if the initial submission is incomplete or the follow-up submission is delayed; less if the first submission is thorough and no follow-up submission is required. If at any time in the process company contacts have any questions, they should not hesitate to call the team leader.

OCA is a stand-alone office within the Commission, and the Chief Accountant reports directly to the Chairman. The Chief Accountant serves as the principal advisor to the Chairman, the Commission and the Commission staff on financial reporting, disclosure and auditing matters. OCA staff work closely with domestic and international private-sector accounting and auditing standards-setting bodies, consult with registrants, auditors, and other Commission staff regarding the application of accounting standards and financial disclosure requirements, and assist in addressing problems that may warrant enforcement actions.

Office of the Chief Accountant has a different role than does the separate Office of Chief Accountant within the Division of Corporation Finance (DCF-OCA) or the separate Chief Accountant’s Office within the Division of Investment Management (IM-CAO). Although OCA, DCF-OCA and IM-CAO often work closely together on registrant issues, they are separate offices with different missions.

The Division of Corporation Finance (DCF) oversees corporate disclosure compliance with the securities laws and SEC Regulations, while the Division of Investment Management (IM) oversees mutual fund disclosure compliance with the Investment Company Act of 1940 and SEC Regulations. In part DCF and IM do this by reviewing some (but not all) documents that registrants are required to file with the Commission. The Chief Accountants of DCF and IM advise their Division Directors on financial reporting matters including those involving compliance with generally accepted accounting principles and the proper content of financial statements and related disclosures. DCF-OCA also supports the Assistant Director offices by acting as a technical resource for the Assistant Director office accountants. Similarly, IM-CAO supports the IM disclosure review groups by acting as a technical resource for IM accountants.

The Division of Enforcement also has a separate Office of Chief Accountant. Accordingly, companies should consider which Chief Accountant's office they wish to correspond with prior to initiating contact. Generally, questions concerning the application of generally accepted accounting principles should be sent to OCA, while questions concerning the age, form, and content of financial statements required to be included in a filing or other requirements of SEC regulations should be addressed to DCF-OCA or IM-CAO, as appropriate.

Public companies have a responsibility to ensure that the auditors of their financial statements are independent, as do the auditors themselves. Regulation S-X sets forth the form and content of and requirements for financial statements required to be filed with the Commission, including the requirements for auditor independence. Ensuring auditor independence is as important as ensuring that revenues and expenses are properly reported and classified. If the auditor's independence is impaired then the company has not satisfied the requirement to file financial statements audited by an independent accountant. Discovery of an independence issue at the last minute can adversely affect an otherwise timely filing and call into question the reliability of the company's financial reports.

Because auditor independence matters often involve unique and complex fact patterns, OCA staff is able to provide the clearest guidance when companies or auditors provide a written submission outlining the factual details of the auditor independence issues under consideration. The staff believes this process is best accomplished through written submissions on a named basis because of concerns that a clear understanding of the facts may not be accomplished solely through oral and/or anonymous communications. However, in some situations, particularly when asked to clarify certain independence rules, oral communication is acceptable.

Because accounting matters for which companies and their auditors seek the Office of the Chief Accountant’s (OCA's) views often involve complex fact patterns, OCA staff is able to provide the clearest guidance when companies provide a written submission outlining the factual details, accounting considerations, financial statement impact, as well as the disclosures expected to accompany the accounting. The staff believes the consultation process is best accomplished through written submissions on a named basis because of concerns that a clear understanding of the facts may not be accomplished solely through oral and/or anonymous communications. While the staff does accept oral inquiries, these inquiries generally involve broader, emerging issues that are not company or fact specific. As such, responses to no-name or telephone inquiries cannot be relied upon as positions of the staff.

If a company chooses not to consult on an accounting issue with OCA, the company may nevertheless encounter OCA during a review of their filing by the Division of Corporation Finance (DCF) or Investment Management (IM). The accountants in DCF and IM, not those in OCA, perform the reviews of the financial reporting and disclosure information contained in documents submitted to the SEC. The accounting staff in DCF or IM may have questions regarding technical accounting and disclosure matters discussed in a document and they will often consult initially with the Office of Chief Accountant within the Division of Corporation Finance (DCF-OCA) or the separate Chief Accountant's Office within the Division of Investment Management (IM-CAO) and then with OCA as to the answer. As such, OCA serves in a consulting role similar to the role of advisor or national office of an accounting firm.

Another way that an issue may find its way to OCA is if a company asks OCA to review an accounting decision made by DCF or IM. A company would initiate such a review by OCA by informing DCF or IM of its intention to request such a review. In cases of OCA reviews, companies do not need to make a submission directly to OCA in accordance with this guidance if all of the relevant information is contained in the comment letter responses from the company to DCF or IM, although a separate submission to OCA may serve to expedite the process.

Notices Required Under Sect

Pursuant to Section 10A(b) of the Exchange Act, an issuer or its registered public accounting firm may be required to notify the Commission regarding illegal acts.

Rule 10A-1(a)(1) indicates that notices required under Section 10A(b)(3) of the Exchange Act may be provided via “facsimile, telegraph, personal delivery, or any other means, provided it is received by the Office of the Chief Accountant within the required time period.”

The staff believes that, generally, the most timely receipt and attention to correspondence is facilitated through the use of electronic mail and prefers that notices to the Office of the Chief Accountant required by Rule 10A-1 be submitted via this means. Notices that must be submitted to the Office of the Chief Accountant pursuant to Rule 10A-1 should be submitted to: 10Aletters@sec.gov.

Section 1000.08(m) of the SEC Practice Section (SECPS) (as adopted by the PCAOB under Rule 3400T, Interim Quality Control Standards) requires a firm to notify OCA of the cessation of an auditor's relationship with an audit client under certain circumstances.

Registrants Required to File Current Reports on Form 8-K

When the cessation of the auditor-client relationship relates to a registrant that is required to file current reports on Form 8-K, the firm is only required to notify OCA if the former audit client has not reported the change in auditor in a timely filed Form 8-K.

See Release No. 34-72087 (May 2, 2014), approving amendments to certain of the PCAOB's rules including an amendment to Section 1000.08(m) of the SEC Practice Section.

Registrants not Required to File Current Reports on Form 8-K

For SEC Registrants that are not required to file current reports on Form 8-K, including foreign private issuers required to make reports on Form 6-K and investment companies required to file reports under Rule 30b1-1 of the Investment Company Act (other than business development companies), the firm is required to notify OCA by the end of the fifth business day following the firm's determination that the client-auditor relationship has ended, irrespective of whether or not the registrant reported the change in auditors in a timely filed report).

Submitting Notifications of Resignations and Dismissals From Audit Engagements

When notification is required, firms may email a copy of the SECPS letter to OCA at SECPSletters@sec.gov. The SEC staff strongly encourages sending the notification letter by e-mail, and the staff will accept the date the e-mail is received as the notification date.

The exact name of the registrant and the Commission File Number as it appears on the cover page of the annual report should be used in the e-mail. If the cessation of the client-auditor relationship affects multiple SEC registrants (e.g., a parent with publicly-registered subsidiaries, series of mutual funds), the exact name of each registrant and each Commission File Number should be set forth in the e-mail.

A person subject to a Commission suspension order from appearing and practicing before the Commission as an accountant pursuant to Rule of Practice 102(e) may submit an application for reinstatement. To begin an application for reinstatement please email the staff at OCA-Reinstatements@sec.gov.