[Federal Register Volume 75, Number 248 (Tuesday, December 28, 2010)]
[Notices]
[Pages 81684-81685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32650]
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SECURITIES AND EXCHANGE COMMISSION
[Securities Act of 1933, Release No. 33-9168/December 22, 2010;
Securities Exchange Act of 1934; Release No. 34-63596/December 22,
2010]
Order Approving Public Company Accounting Oversight Board Budget
and Annual Accounting Support Fee for Calendar Year 2011
The Sarbanes-Oxley Act of 2002, as amended (the ``Sarbanes-Oxley
Act''), 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'').
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 Commission must approve the PCAOB's annual
budget and accounting support fee.
Section 982 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act'') \1\ 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, beginning in 2011. The 2011 budget approved and
submitted by the Board includes an allocation of the annual accounting
support fee among issuers and brokers and dealers.
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\1\ 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. The
Commission's Rules of Practice related to its Informal and Other
Procedures include a rule that facilitates the Commission's review and
approval of PCAOB budgets and the annual accounting support fee.\2\
This budget rule provides, among other things, a timetable for the
preparation and 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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\2\ 17 CFR 202.190. See Release No. 33-8724 (July 18, 2006) [71
FR 41998 (July 24, 2006)].
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In accordance with the budget rule, in March 2010 the PCAOB
provided the Commission with a narrative description of its program
issues and outlook for the 2011 budget year. In response, the
Commission provided the PCAOB with economic assumptions and budgetary
guidance for the 2011 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 Executive
Director 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 2010 actual spending; and attended
several meetings with management and staff of the PCAOB to further
develop an 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
[[Page 81685]]
to the PCAOB. The PCAOB approved its 2011 budget during an open meeting
on November 23, 2010 and submitted that budget for Commission approval
on November 29, 2010.
After considering the above, the Commission did not identify any
proposed disbursements in the 2011 budget adopted by the PCAOB that are
not properly recoverable through the annual accounting support fee, and
the Commission believes that the aggregate proposed 2011 annual
accounting support fees do not exceed the PCAOB's aggregate recoverable
budget expenses for 2011. The Commission looks forward to the PCAOB's
annual updating of its strategic plan and the opportunity for the
Commission to review and provide views to the PCAOB on a draft of the
updated plan.
In its role as the oversight body of the PCAOB, the Commission is
aware of the various uncertainties the PCAOB faces with respect to
budgeting its resources and the potential impact if actual experience
deviates from budget assumptions. Further, the Commission believes that
the 2011 budget approved and submitted by the Board provides sufficient
resources and flexibility for the PCAOB to continue to fulfill its
mandate and to respond to changes in the assumptions upon which the
budget is based. Should the PCAOB find the need to reallocate
resources, the PCAOB should work closely with Commission staff on
whether any reprogramming efforts result in the need for a supplemental
budget request under the Commission's budget rule. In considering any
reallocation that may be necessary in 2011, the Commission encourages
the Board to identify expenditures in its 2011 budget where flexibility
exists.
As part of its review of the PCAOB's 2011 budget, the Commission
notes that there are certain budget-related matters that should be
addressed or more closely monitored during 2011 related to: (1) The
PCAOB's inspections program; (2) its information technology programs;
and (3) the impact of implementing legislative and other actions on the
PCAOB. Accordingly, the Commission directs the PCAOB during the 2011
budget cycle to:
(1) Continue to include in its quarterly reports to the Commission
information about the PCAOB's inspections program. Such information
will include (a) statistics relative to the numbers and types of firms
budgeted and expected to be inspected in 2011, including by location
and by year the inspections that 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.
(2) Continue to include detailed information about the state of the
PCAOB's information technology in its quarterly reports to the
Commission, including planned, estimated, and actual costs for
information technology projects. Such information should also include
project plans, life cycle costs and progress, and provide an indication
of the level and nature of involvement of consultants.
(3) Consult with the Commission about the PCAOB's plans for
implementing changes in response to legislative actions, advisory
committees, or consultant reports.
The Commission has determined that the PCAOB's 2011 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 2011 are
approved.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-32650 Filed 12-27-10; 8:45 am]
BILLING CODE 8011-01-P