[Federal Register Volume 84, Number 247 (Thursday, December 26, 2019)]
[Notices]
[Pages 71024-71025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27697]


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SECURITIES AND EXCHANGE COMMISSION

[Securities Act of 1933 Release No. 33-10735 / December 18, 2019; 
Securities Exchange Act of 1934 Release No. 34-87785 / December 18, 
2019]


Order Approving Public Company Accounting Oversight Board Budget 
and Annual Accounting Support Fee for Calendar Year 2020

    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 Securities and Exchange Commission (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 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

[[Page 71025]]

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 2019 the PCAOB 
provided the Commission with a narrative description of its program 
issues and outlook for the 2020 budget year. In response, the 
Commission provided the PCAOB with economic assumptions and general 
budgetary guidance for the 2020 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 and attended several meetings with staff of the PCAOB 
to further develop the 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 ``passback'' letter to the 
PCAOB on October 31, 2019. On November 19, 2019, the PCAOB adopted its 
2020 budget and accounting support fee 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 2020 budget adopted by the PCAOB that are 
not properly recoverable through the annual accounting support fee, and 
the Commission believes that the aggregate proposed 2020 annual 
accounting support fee does not exceed the PCAOB's aggregate 
recoverable budget expenses for 2020.
    The Commission directs the PCAOB during 2020 to schedule monthly 
meetings, as needed, with the Commission's staff about the 
transformation initiatives that are expected to have a significant 
impact on the 2021 PCAOB budget, including significant differences 
between actual and budgeted amounts, and anticipated cost savings. 
Separately, the Commission directs the PCAOB to continue its written 
quarterly updates on recent activities, including transformation 
initiatives, for the PCAOB's Office of Economic and Risk Analysis, 
Office of Information Technology, and Division of Registration and 
Inspections. The PCAOB Board will make itself available to meet with 
the Commissioners on these and other topics. The PCAOB should also 
submit its 2019 annual report to the Commission by March 30, 2020.
    The Commission understands that the Office of Management and Budget 
(``OMB'') has determined that the 2020 budget of the PCAOB is subject 
to sequestration under the Budget Control Act of 2011.\4\ For 2019, the 
PCAOB sequestered $17.0 million. That amount will become available in 
2020. For 2020, the sequestration amount will be 5.9% or $16.8 million. 
Consequently, we expect the PCAOB will have approximately $0.2 million 
in excess funds available from the 2019 sequestration for spending in 
2020. Accordingly, the PCAOB has reduced its accounting support fee for 
2020 by approximately $0.2 million.
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    \4\ See ``OMB Report to the Congress on the Joint Committee 
Reductions for Fiscal Year 2020,'' March 18, 2019, Appendix, pg. 16 
of 17 available at https://www.whitehouse.gov/wp-content/uploads/2019/03/2020_JC_Sequestration_Report_3-18-19.pdf.
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    The Commission has determined that the PCAOB's 2020 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 2020 are approved.

    By the Commission.

Vanessa A. Countryman,
Secretary.
[FR Doc. 2019-27697 Filed 12-23-19; 8:45 am]
 BILLING CODE 8011-01-P


