[Federal Register Volume 83, Number 11 (Wednesday, January 17, 2018)]
[Notices]
[Pages 2470-2471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00642]


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SECURITIES AND EXCHANGE COMMISSION

[Securities Act of 1933 Release No. 33-10453/January 10, 2018; 
Securities Exchange Act of 1934 Release No. 34-82483/January 10, 2018]


Order Approving Public Company Accounting Oversight Board Budget 
and Annual Accounting Support Fee for Calendar Year 2018

    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. Section 982 of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-
Frank 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.
    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 governs the Commission's review and approval of PCAOB 
budgets and annual accounting support fees.\3\ 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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    \3\ 17 CFR 202.190.
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    In accordance with the budget rule, in March 2017 the PCAOB 
provided the Commission with a narrative description of its program 
issues and outlook for the 2018 budget year. In response, the 
Commission provided the PCAOB with economic assumptions and general 
budgetary guidance for the 2018 budget year. The PCAOB subsequently 
delivered a preliminary budget and budget justification to the 
Commission. Staff from the Commission's Office of the Chief Accountant 
and Office of 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 2017 actual 
spending; and attended several meetings with management and staff of 
the PCAOB to further develop their 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

[[Page 2471]]

on this review, the Commission issued a ``pass back'' letter to the 
PCAOB on October 25, 2017. On November 16, 2017, the PCAOB adopted its 
2018 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 2018 budget adopted by the PCAOB that are 
not properly recoverable through the annual accounting support fee, and 
the Commission believes that the aggregate proposed 2018 annual 
accounting support fee does not exceed the PCAOB's aggregate 
recoverable budget expenses for 2018.
    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 its views to the PCAOB as future updates are made 
to the plan. In addition, the PCAOB should submit its 2017 annual 
report to the Commission by April 2, 2018.
    The Commission directs the Board during 2018 to continue to provide 
periodic updates to the Commission relating to the monitoring of 
estimated cost savings and efficiencies gained through certain 
initiatives implemented in recent years. The Board shall continue its 
review of its compensation and travel policies and report to the 
Commission the results of this review.
    In May 2017, the PCAOB formed the Office of Economic and Risk 
Analysis (``ERA'') by integrating the staff of the Center for Economic 
Analysis (``CEA'') that conducted economic analysis and research with 
staff from the Office of Research and Analysis (``ORA'') that conducted 
risk assessment and data analysis. The Commission directs the PCAOB 
during 2018 to provide quarterly updates to the Commission on ERA's 
activities and progress towards its stated goals, including the work to 
integrate staff from the former CEA and ORA.
    The Commission directs the Board during 2018 to continue to provide 
in its quarterly reports to the Commission detailed information about 
the state of the PCAOB's information technology (``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 report that is prepared by PCAOB 
staff and submitted to the Board.
    The Commission also directs the Board during 2018 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 2018, 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 2018 budget of the PCAOB to be 
sequestrable under the Budget Control Act of 2011.\4\ For 2017, the 
PCAOB sequestered $17 million. That amount will become available in 
2018. For 2018, the sequestration amount will be 6.6% or $17.2 million. 
Accordingly, the PCAOB should submit a revised spending plan for 2018 
reflecting a $0.2 million reduction to budgeted expenditures as a 
result of the increase in sequestration amount from 2017 to 2018.
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    \4\ See ``OMB Report to the Congress on the Joint Committee 
Reductions for Fiscal Year 2018'', Appendix page 16 of 16 available 
at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/sequestration_reports/2018_jc_sequestration_report_may2017_potus.pdf.
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    The Commission has determined that the PCAOB's 2018 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 2018 are approved.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018-00642 Filed 1-16-18; 8:45 am]
 BILLING CODE 8011-01-P


