[Federal Register: December 26, 2007 (Volume 72, Number 246)]
[Notices]
[Page 73051-73052]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26de07-108]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 8873; Release No. 56986]
Securities Act of 1933; Securities Exchange Act of 1934; Order
Approving Public Company Accounting Oversight Board Budget and Annual
Accounting Support Fee for Calendar Year 2008
The Sarbanes-Oxley Act of 2002 (the ``Act'') established the Public
Company Accounting Oversight Board (``PCAOB'') to oversee the audits of
public companies and related matters, to protect investors, and to
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. Section 109 of the 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. Section 109(h) amends section 13(b)(2) of the Securities
Exchange Act of 1934 to require issuers to pay the allocable share of a
reasonable annual accounting support fee or fees, determined in
accordance with section 109 of the Act. Under section 109(f), the
aggregate annual accounting support fee shall not exceed the PCAOB's
aggregate ``recoverable budget expenses,'' which may include operating,
capital and accrued items. Section 109(b) of the 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 Securities and
Exchange Commission (the ``Commission'').
On July 18, 2006, the Commission amended its Rules of Practice
related to its Informal and Other Procedures to add a rule to
facilitate the Commission's review and approval of PCAOB budgets and
accounting support fees.\1\ The new 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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\1\ 17 CFR 202.11. See Release No. 33-8724 (July 18, 2006) [71
FR 41998 (July 24, 2006)].
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The new budget rule requires compliance beginning with the budget
process for fiscal year 2008. Accordingly, in March 2007 the PCAOB
provided the Commission with a narrative description of its program
issues and outlook for the 2008 budget year. In response, the
Commission staff provided to the PCAOB staff economic assumptions and
budgetary guidance for the 2008 budget year. The PCAOB subsequently
delivered a preliminary budget and budget justification to the
Commission. The staff from the Commission's Offices of the Chief
Accountant, Executive Director and Information Technology 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 2007 actual spending, and attended several meetings with management
and staff of the PCAOB to develop an understanding of the PCAOB's
budget and operations. During the course of the Commission's review,
the Commission staff relied upon representations and supporting
documentation from the PCAOB. Based on this comprehensive review, the
Commission issued a ``pass back'' to the PCAOB. The PCAOB approved its
2008 budget on November 19, 2007 and submitted that budget for
Commission approval.
After considering the above, the Commission did not identify any
proposed disbursements in the 2008 budget adopted by the PCAOB that are
not properly recoverable through the annual accounting support fee, and
the Commission believes that the aggregate proposed 2008 annual
accounting support fee does not exceed the PCAOB's aggregate
recoverable budget expenses for 2008.
As part of its review of the 2008 PCAOB budget, the Commission
notes that this is the first year of compliance with the new budget
rule. The Commission recognizes that the PCAOB is continuing to work
with its program areas to develop full and robust submissions in
response to the new budget rule. The PCAOB also is in an important
review and reorganization phase regarding its IT program, and the PCAOB
intends to implement annual and special reporting for registered public
accounting firms, a function required by section 102(d) of the
Sarbanes-Oxley Act of 2002, in the 2008 budget year.
In addition, the Commission believes an integral part of the
PCAOB's budget process, and of import to the Commission in fulfilling
its oversight responsibilities, is the PCAOB's long-range strategic
planning. The budget rule requires the PCAOB to maintain a
comprehensive strategic plan that supports each budget request,\2\
describes the required minimum elements of the plan,\3\ and requires
the PCAOB's budget submission to describe the relationship between the
strategic plan and the resources requested in the budget.\4\ The Board
submitted a strategic plan to the Commission in May, 2007, and the
Commission subsequently provided comments designed to improve the plan
so that it better informs the budget request as anticipated by the rule
and facilitates the Commission's review and approval thereof. Because
of the important role that the strategic plan plays in informing the
PCAOB's budget request, and to address the other items mentioned above,
the Commission
[[Page 73052]]
deems it necessary to set forth the following specific measures.
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\2\ See 17 CFR 202.11(g).
\3\ See 17 CFR 202.11(b)(9).
\4\ See 17 CFR 202.11(b)(2) and (b)(5).
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Accordingly, with respect to the PCAOB's 2009 budget cycle, the
PCAOB will:
1. Develop a full and robust strategic plan, preliminary budget and
budget justification. In particular:
a. The PCAOB will review its strategic plan in connection with the
description of the minimum elements of such a plan in the Commission's
budget approval rule and the Commission's comments noted above.
Consistent with the foregoing, the PCAOB will submit a draft to the
Commission by February 29, 2008 of a revised strategic plan that
includes, among other things, (i) quantifiable and measurable
performance targets, (ii) forecasts of total headcount and budget
summary figures for the current and four following years, (iii) a
candid assessment of the PCAOB's strengths and weaknesses, and (iv) a
broader discussion of environmental factors. The Commission will
provide views to the PCAOB within two weeks after it receives the new
draft plan. Thereafter, the PCAOB will adopt a new strategic plan,
reflecting such views, by March 31, 2008.
b. The PCAOB will further develop and submit a more detailed
preliminary budget, budget justification and performance budget,
including performance targets as required under the budget rule.
2. Include more detailed information about the state of the PCAOB's
IT review and reorganization in its quarterly reports to the
Commission, including plans and estimated and actual costs for IT
projects such as the proposed annual and special reporting system;
3. Implement annual and special reporting in accordance with the
Act and provide an analysis of historical and planned expenditures
related to the review and processing of registrations and annual
reports of public accounting firms, including any associated
information technology costs, and provide a timetable for recovering
those amounts from registered public accounting firms as required by
section 102(f) of the Act;
4. Not increase Chairman and Board salaries for 2008 beyond the
3.3% budgeted increase in the 2008 budget, and Chairman and Board
salaries shall not be further linked to FASB Chairman and Board
salaries; and
5. Keep the Commission and its staff informed of any internal or
third-party reviews of the PCAOB's programs and offices and the
findings of any such reviews. The Commission has determined that the
PCAOB's 2008 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 2008 are
approved.
By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E7-24909 Filed 12-21-07; 8:45 am]
BILLING CODE 8011-01-P