PCAOB's Annual and Special Reporting Rules Effective at Year-End

The PCAOB has issued a reminder to registered firms that its annual and special reporting rules go into effect on December 31, 2009. After that date, firms will have to report special events such as administrative matters, changes in contact information and certain types of legal proceedings on Form 3. Firms that wish to succeed to the registration status of a predecessor firm without a break in registration status and without having to file a new registration application on Form 1 may file optional Form 4. For successions that occurred prior to December 31, 2009, firms must file a Form 4 by January 14, 2010.

Special reports on Form 3 must be filed within 30 days of the event that must be reported. If those events occurred between the time of the firm's registration application and the December 31 effective date, the firm must file its Form 3 on February 1, 2010, since January 30 is a Saturday. The Board has provided samples of Form 3 and Form 4 on its Web site. The Board advised firms that have previously communicated with the registration staff about successions that those communications are informal and do not substitute for the filing of a Form 4.

Beginning in 2010, all firms that are registered with the Board as of March 31 of any year must file an annual report on Form 2 by June 30 of that year covering the 12-month period ending March 31. The annual reports include information about audit reports, disciplinary histories and fees billed to issuer audit clients for certain categories of services. The Board will provide a sample PDF version of Form 2 at a later date.

All forms must be filed electronically through the PCAOB's Web-based system. Registered firms must use an ID and password which are issued during the registration process to access the reporting system. Form 3 may be completed as a Web form or in XML. Form 4 may only be completed as a Web form. Exhibits must be submitted in PDF, GIF or JPEG format. The Board advised that closer to the effective date, it will issue guidance on complying with the reporting requirements and on interacting with the Board's Web-based system for reporting.

The annual and special reports will be available to the public on the PCAOB's Web site, subject to exceptions for information that satisfies the criteria for receiving confidential treatment.

The rules and forms relating to annual and special reporting and to the succession to the registration status of a predecessor firm were initially approved by the SEC on August 13, 2009 and were to take effect on October 12, 2009. However, the Board experienced technical difficulties in deploying its Web-based system and had to postpone the filing of the forms. The postponement of the effective date did not affect the timing of the first annual reports or the first annual fees that are due by June 31, 2010. The rule change was effective upon its submission to the SEC, but interested persons are invited to submit their views on the matter to the SEC by December 10 (File No. PCAOB-2009-03).

Frequency of Inspections

The SEC has also provided notice that the PCAOB has filed with the Commission its amendments to Rule 4003 regarding the frequency of inspections. The amendment gives the Board the ability to postpone, for up to three years, its first inspections that it was required to conduct by the end of 2009 in jurisdictions where the Board has not previously conducted any inspections. The inspection of certain non-U.S. firms has been complicated in some instances by legal obstacles and sovereignty issues.

Where possible, the Board seeks to conduct inspections jointly with local authorities. Many of the Board's foreign counterparts have only recently begun inspections or are building their inspection resources, so coordinating the inspection schedules with those authorities has been difficult. The Board recognizes that some non-U.S. firms may be reluctant to comply with its inspection demands out of concern that doing so might violate local laws or the sovereignty of their home country. However, the Board does not intend to make any further adjustments to its inspection frequency requirements. The Board will make its inspection demands early enough in the year in which they are scheduled to allow the Board to inspect those firms during that year.

The PCAOB's amendment will become effective within 60 days of publication in the Federal Register. The SEC will accept comments through December 16, 2009 (PCAOB-2009-01).