
[Federal Register Volume 79, Number 89 (Thursday, May 8, 2014)]
[Notices]
[Pages 26491-26493]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10543]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72087; File No. PCAOB-2013-03]


Public Company Accounting Oversight Board; Notice of Filing of 
Amendment No. 1, and Order Granting Accelerated Approval of Proposed 
Rules, Amendments To Conform the Board's Rules and Forms to the Dodd-
Frank Act and Make Certain Updates and Clarifications, as Modified by 
Amendment No. 1

May 2, 2014.

I. Introduction

    On December 23, 2013, the Public Company Accounting Oversight Board 
(the ``Board'' or the ``PCAOB'') filed with the Securities and Exchange 
Commission (the ``Commission''), pursuant to Section 107(b) \1\ of the 
Sarbanes-Oxley Act of 2002 (the ``Sarbanes-Oxley Act'') and Section 
19(b) \2\ of the Securities Exchange Act of 1934 (the ``Exchange 
Act''), proposed amendments to conform the Board's rules and forms to 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 
``Dodd-Frank Act'') and make certain updates and clarifications 
(collectively, the ``Proposed Rules''). The Proposed Rules were 
published for comment in the Federal Register on February 3, 2014.\3\ 
At the time the notice was issued, the Commission designated a longer 
period to act on the Proposed Rules, until May 5, 2014.\4\ The 
Commission received one comment letter in response to the notice.\5\ On 
March 13, 2014, the PCAOB filed Amendment No. 1 to the Proposed Rules 
(``Amendment No. 1'').\6\ This order approves the Proposed Rules, as 
modified by Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 7217(b).
    \2\ 15 U.S.C. 78s(b).
    \3\ See Release No. 34-71237 (January 6, 2014), 79 FR 6271 
(February 3, 2014).
    \4\ Ibid.
    \5\ See letter to the Commission from Suzanne H. Shatto, dated 
March 6, 2014 (``Shatto Letter'').
    \6\ In Amendment No. 1, the PCAOB added amendments to Rule 3526, 
Communication with Audit Committees Concerning Independence. These 
amendments were discussed in the Proposed Rules, but the amendments 
to Rule 3526 were inadvertently omitted from the Proposed Rules. The 
Amendment also proposes a non-substantive modification to a cross-
reference in Item 3.2.e.1 of Form 4.
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II. Description of the Proposed Rules

    The Proposed Rules include specific references to audits and 
auditors of brokers and dealers in the Board's rules and are necessary 
to ensure that the

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PCAOB can satisfy its explicit oversight authority granted under the 
Dodd-Frank Act with respect to audits and auditors of brokers and 
dealer that are registered with the Commission. The Proposed Rules also 
conform the Board's rules to the Dodd-Frank amendments that: (1) 
Clarified the definition of ``person associated with a public 
accounting firm,'' \7\ (2) permitted the Board to share certain 
information with foreign auditor oversight authorities,\8\ and (3) 
clarified that the Board's sanctioning authority is not limited to 
persons who are supervisory personnel at the time a failure to 
supervise sanction is imposed.\9\
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    \7\ See Section 2(a)(9)(C) of the Sarbanes-Oxley Act.
    \8\ See Section 105(b)(5)(C) of the Sarbanes-Oxley Act.
    \9\ See Section 105(c)(6)(A) of the Sarbanes-Oxley Act.
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    Beyond these conforming amendments, the Proposed Rules include 
three additional categories of amendments that tailor certain of the 
Board's rules to the audits of brokers and dealers, call for relevant 
broker and dealer audit client information on the Board's forms, and 
amend a number of rules in light of the Board's experience 
administering and enforcing these rules.
    First, the PCAOB is tailoring the Board's professional practice 
standards to the audits of brokers and dealers. As amended, Rule 3521 
(Contingent Fees), Rule 3522 (Tax Transactions) and Rule 3526 
(Communication with Audit Committees Concerning Independence) apply to 
the audits of brokers and dealers to the same extent that they 
previously applied to the audits of issuers.
    Second, the Board is amending its registration, withdrawal, and 
reporting forms (Forms 1, 1-WD, 2, 3, and 4), and the general 
instructions to these forms, to call for relevant broker and dealer 
audit client information. This information includes, among other 
things, information identifying each audit report issued by registered 
firms for broker and dealer audit clients during their annual reporting 
periods.
    Finally, the Board is amending a number of rule provisions and form 
items in light of administrative experience and to make a number of 
updates to address events that have occurred since the last time the 
rules were updated. These amendments, for example, address 
circumstances where an issuer audit client encounters a change in its 
principal auditor and the issuer does not comply with the Commission's 
four business day reporting requirement concerning the change in 
auditors pursuant to Item 4.01 of Form 8-K.
    In addition, Amendment No. 1 includes rule text for proposed 
amendments to Rule 3526 that was inadvertently omitted from the PCAOB's 
original rule filing and updates a cross-reference in Form 4 that would 
have become outdated by this Order.
    The amendments to the PCAOB's rules, SEC Practice Section 
membership requirements, and Ethics Code will take effect on June 1, 
2014. The amendments to Forms 1, 1-WD, 3, and 4 will take effect July 
1, 2014. The amendments to Form 2 will take effect April 1, 2015.

III. Comment Letters

    As noted above, the Commission received one comment letter 
concerning the Proposed Amendments, which expressed support for the 
Proposed Amendments.\10\
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    \10\ See Shatto Letter.
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IV. The PCAOB's Emerging Growth Company Request

    Section 103(a)(3)(C) of the Sarbanes-Oxley Act provides that any 
additional rules adopted by the PCAOB subsequent to April 5, 2012 do 
not apply to the audits of emerging growth companies (``EGCs''), unless 
the Commission determines that the application of such additional 
requirements is necessary or appropriate in the public interest, after 
considering the protection of investors and whether the action will 
promote efficiency, competition, and capital formation.\11\ Having 
considered those factors, and as explained further below, the 
Commission finds that applying the Proposed Rules to audits of EGCs is 
necessary or appropriate in the public interest.
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    \11\ Section 103(a)(3)(C) of the Sarbanes-Oxley Act, as amended 
by Section 104 of the Jumpstart Our Business Startups Act (the 
``JOBS Act''). The term ``emerging growth company'' is defined in 
Section 3(a)(80) of the Exchange Act.
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    The PCAOB has proposed application of its Proposed Rules to audits 
of all issuers, as applicable, including EGCs; and the PCAOB requested 
that the Commission make the determination required by Section 
103(a)(3)(C).\12\ To assist the Commission in making its determination, 
the PCAOB prepared and submitted to the Commission its own EGC 
analysis. The PCAOB's EGC analysis was included in the Commission's 
public notice soliciting comment on the Proposed Rules. No comments 
were received on the analysis.
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    \12\ To the extent that these proposed rules apply solely in 
connection with the obligations of registered brokers and dealers or 
the auditors of registered brokers and dealers pursuant to 17 CFR 
240.17a-5, no separate determination is necessary under 15 U.S.C. 
7213(a)(3)(C).
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    Based on the analysis submitted, we believe the information in the 
record is sufficient for the Commission to make the requested EGC 
determination in relation to the Proposed Rules. The PCAOB's EGC 
analysis discussed its approach to developing the Proposed Rules, as 
well as the characteristics of EGCs and economic considerations. For 
the Proposed Rules that are not simply conforming amendments, the PCAOB 
stated that it has no reason to think the economic consequences for 
EGCs would differ significantly from those for issuers who are not 
EGCs, and that it estimated that the cost-related implications of these 
amendments would not be significant. Finally, the Commission takes note 
of the PCAOB's statements that the Proposed Rules that were made in 
light of the PCAOB's administrative experience generally are expected 
to reduce existing compliance burdens, facilitate more efficient use of 
PCAOB resources, and maintain or improve meaningfulness of information 
required to be reported by registered firms to the PCAOB.

V. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether Amendment No. 1 
is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/pcaob.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number PCAOB-2013-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Kevin M. O'Neill, 
Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. PCAOB-2013-03. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/pcaob.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rules that are filed 
with the Commission, and all

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written communications relating to the proposed rules between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing will also be available for inspection and copying at the 
principal office of the PCAOB. All comments received will be posted 
without charge; we do not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File No. PCAOB-
2013-03 and should be submitted on or before May 29, 2014.

VI. Conclusion

    The Commission has carefully reviewed and considered the Proposed 
Rules, as modified by Amendment No. 1, and the information submitted 
therewith by the PCAOB, including the PCAOB's EGC analysis. In 
connection with the PCAOB's filing and the Commission's review,
    A. The Commission finds that the Proposed Rules, as modified by 
Amendment No. 1, are consistent with the requirements of the Sarbanes-
Oxley Act and the securities laws and are necessary or appropriate in 
the public interest or for the protection of investors; and
    B. Separately, the Commission finds that the application of the 
Proposed Rules, as modified by Amendment No. 1, to EGC audits as 
applicable is necessary or appropriate in the public interest, after 
considering the protection of investors and whether the action will 
promote efficiency, competition, and capital formation.
    Additionally, the Commission finds good cause to approve the 
filing, as modified by Amendment No. 1 to the Proposed Rules, prior to 
the thirtieth day after the date of the publication of notice of the 
filing thereof in the Federal Register. The content of Amendment No. 1, 
which does not raise any novel issues, makes one technical amendment to 
the proposed rule to correct an inadvertent omission and one technical 
amendment to update a cross-reference in a Form that would become 
outdated if the proposed rules in the original rule filing are approved 
by the Commission. Accelerated approval would allow the PCAOB to update 
its rules immediately, thus providing users with greater clarity and 
certainty. Accordingly, the Commission finds that good cause exists to 
approve the filing, as modified by Amendment No. 1, on an accelerated 
basis.
    It is therefore ordered, pursuant to Section 107 of the Act and 
Section 19(b)(2) of the Exchange Act, that the Proposed Rules (File No. 
PCAOB-2013-03), as modified by amendment No. 1, be and hereby are 
approved on an accelerated basis.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10543 Filed 5-7-14; 8:45 am]
BILLING CODE 8011-01-P


