Magazine article The CPA Journal

A Practical Guide to the New PCAOB Reporting Requirements

Magazine article The CPA Journal

A Practical Guide to the New PCAOB Reporting Requirements

Article excerpt

The Sarbanes-Oxley Act of 2002 (SOX) requires that any accounting firm that prepares or issues an audit report with respect to a U.S. public company must register with the Public Company Accounting Oversight Board (PCAOB). Until recently, an accounting firm was required only to provide iriformation current as of the initial registration date for the firm. Effective December 31, 2009, accounting firms registered with the PCAOB are required to file annual and current reports with the PCAOB. On August 13, 2009, the SEC approved the proposed rules with the original effective date of October 12, 2009, but on September 30, 2009, the PCAOB delayed the effective date to December 31, 2009. These mies implement the requirements of SOX section 102(d) that registered public accounting firms 1 ) report annual information about the firms and their audit practices, and 2) submit, as specified by the PCAOB or the SEC, more frequent information necessary to update the information previously filed with the PCAOB. Until now, the PCAOB had no requirement for annual reports or amendments to report material changes in initial registration information.

The purposes of the new mies are 1) to keep the PCAOB up-to-date on a firm's basic professional information, such as name, location, licenses, and contact information; 2) to provide the PCAOB with current information regarding a firm's audit practice in order to facilitate analysis and inspection by the PCAOB and keep the public informed of such information; and 3) to alert the PCAOB of any events that would require more immediate action by the PCAOB in terms of inspections or enforcement and that might otherwise warrant public disclosure. As required by SOX section 102(e), all registration applications and annual reports will be made publicly available, subject to PCAOB and SEC rules on the confidentiality of proprietary and personal information. The PCAOB is also authorized to collect an initial registration fee and an annual fee from each registered firm.

A summary of the disclosures required by the annual and current reports and the instructions for completing such disclosures, as well as a discussion of the substantive issues to be disclosed, follow below. Also suggested are practical recommendations for firms on gathering and collecting the information necessary to comply with the PCAOB reporting mies. In addition to the annual and current reports required on an ongoing basis, the new rules required registered firms to file an initial "catch-up report" as a special report on Form 3 by February 1, 2010, for all material changes in the firm's disclosures that had occurred since such firm's initial registration.

Initial Registration

An accounting firm's initial report is filed with the PCAOB on Form 1 and is required before an accounting firm is allowed to attest to financial statements being filed by an issuer with the SEC. Form 1 must be submitted through the PCAOB's web-based registration system. The PCAOB has 45 days to take action after the fimi submits its application. There are three possible actions: approval, issuance of a notice of a hearing, or request for additional information. If the PCAOB requests additional information concerning the application, a new 45-day period will begin when the additional information is received. The new rules do not alter the information required in the Form 1 registration.

Annual Report

The PCAOB adopted the new Form 2 for annual reporting by registered accounting firms. Its purpose is to provide a profile of the firm at a point in time based on its activity related to issuers over the most recent 12-month period.

Filing requirements. The annual report on Form 2 must be filed with the PCAOB no later than June 30 of each year, and the annual report must cover a 12-month period from April 1 of the preceding calendar year through March 31 of the current calendar year (the reporting period) in which the annual report is filed. …

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