The largest source of funding for the PCAOB comes from the companies whose financial statements must be audited by PCAOB-registered firms. Section 109 of the Sarbanes-Oxley Act, as amended by the Dodd-Frank Act, requires funds to cover the PCAOB's annual budget, less registration and annual fees, to be collected from "issuers," as defined in the Sarbanes-Oxley Act, and from brokers and dealers registered with the Securities and Exchange Commission (SEC). The amount due from issuers, brokers and dealers is referred to as the Board's "accounting support fee." Beginning in 2011, the Board's budget separately listed the accounting support fee to be assessed to issuers and brokers and dealers. The Board's budget and accounting support fee are approved annually by the SEC.
On June 14, 2011, the Board approved amendments to its funding rules related to the equitable allocation, assessment, and collection of the accounting support fee to be paid by brokers and dealers. The amendments also included revisions to the Board's funding rules related to the allocation, assessment, and collection of the accounting support fee paid by issuers. The amendments were approved by the SEC on August 18, 2011.
In establishing rules on the allocation of the accounting support fee, the Board was guided by two overarching principles:
- The fee must be allocated in a manner that reflects the proportionate sizes of issuers, brokers and dealers.
- The fee must be allocated in an equitable manner.
These two principles are generally related because the size of an entity may serve as an indication of the complexity of an audit, which could be an equitable measure on which to base the allocation of the fee.
For issuers, failure to pay an allocated share of the accounting support fee constitutes a violation of the Securities Exchange Act of 1934. The Board may report nonpayment of the fee by issuers, brokers and dealers to the SEC, and in the case of brokers and dealers, to the broker's or dealer's designated examining authority.
Once each year, issuers are allocated a portion of the issuer accounting support fee based on their average monthly U.S. equity market capitalization or net asset value. For 2011, issuers assessed a share of the fee were equity companies with average monthly U.S. equity market capitalization of more than $25 million and investment companies with average monthly net asset value or U.S. equity market capitalization of more than $250 million.
Under the amended rules, the market capitalization thresholds increased to $75 million for equity companies and to $500 million for investment companies. The increased market capitalization thresholds will be effective for the assessment of the 2012 issuer accounting support fee.
Under the amended rules, brokers and dealers are allocated a portion of the broker-dealer accounting support fee based on their average, quarterly tentative net capital. Generally, brokers and dealers with average, quarterly tentative net capital of greater than $5 million may be assessed a share of the fee.
The initial allocation, assessment, and collection of the accounting support fee for brokers and dealers took place at year-end of 2011.