
[Federal Register Volume 81, Number 53 (Friday, March 18, 2016)]
[Notices]
[Pages 14905-14906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06095]


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SECURITIES AND EXCHANGE COMMISSION

[Securities Act of 1933; Release No. 10054/March 14, 2016; Securities 
Exchange Act of 1934; Release No. 77367/March 14, 2016]


Order Approving Public Company Accounting Oversight Board Budget 
and Annual Accounting Support Fee for Calendar Year 2016

    The Sarbanes-Oxley Act of 2002, as amended (the ``Sarbanes-Oxley 
Act''),\1\ 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 Dodd-Frank 
Wall Street Reform and Consumer Protection Act \2\ amended the 
Sarbanes-Oxley Act to provide the PCAOB with explicit authority to 
oversee auditors of broker-dealers registered with the Commission. 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'').
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    \1\ 15 U.S.C. 7201 et seq.
    \2\ Public Law 111-203, 124 Stat. 1376 (2010).
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    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 PCAOB's annual budget and accounting support fee 
are subject to approval by the Commission. In addition, the PCAOB must 
allocate the annual accounting support fee among issuers and among 
brokers and dealers.\3\
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    \3\ Separately the Commission is responsible for review of an 
accounting support fee for the FASB pursuant to Section 109(e) of 
the Sarbanes-Oxley Act that is allocated among issuers. This 
separate accounting support fee is not addressed by this order.
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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. Rule 190 of 
Regulation P facilitates the Commission's review and approval of PCAOB 
budgets and annual accounting support fees.\4\ 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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    \4\ 17 CFR 202.190.
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    In accordance with the budget rule, in March 2015 the PCAOB 
provided the Commission with a narrative description of its program 
issues and outlook for the 2016 budget year. In response, the 
Commission provided the PCAOB with economic assumptions and budgetary 
guidance for the 2016 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 Financial 
Management 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 2015 actual spending; and attended 
several meetings with management and staff of the PCAOB to further 
develop the Commission staff's 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 authorized the staff to issue a ``pass 
back'' letter to the PCAOB. On November 24, 2015, the PCAOB approved 
its 2016 budget during an open meeting, and subsequently submitted that 
budget to the Commission for approval.
    After considering the above, the Commission did not identify any 
proposed disbursements in the 2016 budget adopted by the PCAOB that are 
not properly recoverable through the annual accounting support fee, and 
the Commission believes that the aggregate proposed 2016 annual 
accounting support fee does not exceed the PCAOB's aggregate 
recoverable budget expenses for 2016. The Commission also acknowledges 
the PCAOB's updated strategic plan and encourages the PCAOB to continue 
keeping the Commission and its staff apprised of significant new 
developments. The Commission looks forward to providing views to the 
PCAOB as future updates are made to the plan.
    We understand that the PCAOB has taken significant steps to advance 
its assessments of the performance and management of the PCAOB's 
standard-setting process, including the engagement of an external 
consultant. The Commission directs the PCAOB to continue to provide 
timely updates throughout the year on the progress of the Board's 
review of the PCAOB's standard setting process, including anticipated 
changes to processes or funding.
    The Commission recognizes that in recent years, the PCAOB has taken 
significant steps to establish the Center for Economic Analysis 
(``Center''). The Commission directs the PCAOB to continue providing 
quarterly updates to the Commission on the Center's activities and 
progress towards its stated goals.
    The Commission directs the Board to continue to provide in its 
quarterly reports to the Commission detailed information about the 
state of the PCAOB's IT program, including planned, estimated, and 
actual costs for IT projects, and the level of involvement of 
consultants. These reports also should continue to include: (a) A 
discussion of the Board's assessment of the IT program; and (b) the 
quarterly IT

[[Page 14906]]

report that is prepared by PCAOB staff and submitted to the Board. The 
Commission also directs the Board during 2016 to continue to include in 
its quarterly reports to the Commission information about the PCAOB's 
inspections program. Such information is to include: (a) Statistics 
relative to the numbers and types of firms budgeted and expected to be 
inspected in 2016, including by location and by year the inspections 
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.
    The Commission understands that the Office of Management and Budget 
(``OMB'') has determined the 2016 budget of the PCAOB to be 
sequestrable under the Budget Control Act of 2011.\5\ Consequently, we 
expect the PCAOB will have approximately $1 million in excess funds 
available from the 2015 sequestration for spending in 2016. 
Accordingly, the PCAOB has reduced its accounting support fee for 2016 
by approximately $1 million.
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    \5\ See ``OMB Report to the Congress on the Joint Committee 
Reductions for Fiscal Year 2016'', Appendix page 15 of 15 at: 
https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_jc_sequestration_report_speaker.pdf.
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    The Commission has determined that the PCAOB's 2016 budget and 
annual accounting support fee are consistent with Section 109 of the 
Sarbanes-Oxley Act. Accordingly,
    It is ordered, pursuant to Section 109 of the Sarbanes-Oxley Act, 
that the PCAOB budget and annual accounting support fee for calendar 
year 2016 are approved.

By the Commission.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06095 Filed 3-17-16; 8:45 am]
 BILLING CODE 8011-01-P


