UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Securities Act of 1933
Release No. 8550 / March 3, 2005
Securities Exchange Act of 1934
Release No. 51313 / March 3, 2005
ORDER APPROVING PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD REVISED BUDGET AND ANNUAL ACCOUNTING SUPPORT FEE FOR CALENDAR YEAR 2005
The Sarbanes-Oxley Act of 2002 (the “Act”) established the Public Company Accounting Oversight Board (“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 of public accounting firms and standard setting, inspection, and disciplinary programs. Section 109 of the 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. Section 109(h) amends Section 13(b)(2) of the Securities Exchange Act of 1934 to require issuers to pay the allocable share of a reasonable annual accounting support fee or fees, determined in accordance with Section 109 of the Act. Under Section 109(f), the aggregate annual accounting support fee shall not exceed the PCAOB’s aggregate “recoverable budget expenses,” which may include operating, capital and accrued items. Section 109(b) of the 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.
The PCAOB originally adopted a budget for calendar year 2005 and submitted it to the Commission in October 2004. After further review of its proposed expenditures for 2005, the PCAOB adopted a revised budget for calendar year 2005 and submitted that budget to the Commission for approval on January 6, 2005. In its supporting materials, the PCAOB noted that the revised budget “supports its mission to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair and independent audit reports. This includes carrying out the PCAOB’s core functions of registration, inspection, enforcement, and standards-setting.”
In accordance with its responsibilities to oversee the PCAOB, the Commission reviewed both the original and revised budgets filed by the PCAOB for 2005 and its aggregate accounting support fee for 2005, which will fund the PCAOB’s expenditures. During the course of the Commission’s review, among other things, the Commission staff reviewed and relied upon representations and supporting documentation from the PCAOB.
The Commission did not identify any proposed disbursements in the revised budget that are not properly recoverable through the annual accounting support fee, and the Commission believes that the revised aggregate proposed 2005 annual accounting support fee does not exceed the PCAOB’s aggregate recoverable budget expenses for 2005.
The Commission recognizes that the PCAOB is continuing to develop its infrastructure and will be increasing its staffing levels significantly in 2005 in order to fulfill its responsibilities under the Act. However, during the next budget cycle, the PCAOB will have substantially completed its start-up activities and finished a full year of inspections, including inspections of the eight largest registered public accounting firms and a number of smaller registered public accounting firms. As the PCAOB already has agreed, prior to the Commission’s review of the 2006 PCAOB budget, the Commission expects to have received: (i) the PCAOB’s long-range strategic plan for its operations and budget, (ii) a self-assessment of its internal controls for its operations and budget, and (iii) a briefing regarding the Commission’s initial inspection of the PCAOB, as contemplated by Section 107(a) of the Act, in order to enable the Commission to assess whether the PCAOB is fulfilling its statutory responsibilities. Because of the specialized subject matter of the PCAOB’s operations, we expect that the Commission’s examinations of the PCAOB will draw on the expertise of several offices within the Commission, including the Office of Compliance, Inspections and Examinations and the Office of the Chief Accountant. Together, these offices will ensure that the Commission’s examinations of the PCAOB are tailored to its specific operations.
Based on the foregoing, the Commission has determined that the PCAOB’s revised 2005 budget and annual accounting support fee are consistent with Section 109 of the Act. Accordingly,
IT IS ORDERED, pursuant to Section 109 of the Act, that the PCAOB budget and annual accounting support fee for calendar year 2005 are approved.
By the Commission.
Margaret H. McFarland