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 Statement on Consideration of Adopting Rules on Reporting by Registered Public Accounting Firms and on Succeeding to a Predecessor Firm's Registration Status

DATE: July 29, 2008
SPEAKER: Daniel L. Goelzer, Board Member
EVENT: PCAOB Open Board Meeting
LOCATION: Washington, DC

I would like to emphasize the carefully tailored nature of the rules and form we are considering. Form 4 and the related rules are designed to address two very specific situations.

First, a registered firm may decide to change its form or place of organization. It serves no purpose to force the new firm to go through the full Board registration process if it is really just a continuation, in different clothing, of an existing firm. Form 4 provides the vehicle to inform the Board of the change and to continue the firm’s registration uninterrupted.

Second, registered and unregistered firms may combine in such a way that a previously-unregistered firm emerges as the survivor. When that happens, in certain circumstances it makes sense to let the survivor take over the registration of a predecessor. In some cases, the survivor’s registration can be permanent, just as if a registered firm had merely changed its legal form. In others, the registration should only be temporary -- a bridge that lets the survivor continue to serve its public company audit clients while the Board considers its full registration application.

In both scenarios, Form 4 confers permanent registration only in cases where there is really nothing substantive for the Board to decide. It is quite appropriate to let a new auditing firm that is, in reality, the continuation of a pre-existing public accounting practice retain its registration status with a minimum of hassle and paperwork. However, Form 4 is also designed to ensure that a firm that should be subject to Board pre-registration scrutiny is not permitted to end-run our registration process.

Unfortunately, the rules and instructions that implement these fairly simple ideas are necessarily somewhat complex. However, it is useful to keep in mind that Form 4 is optional. It is a convenience, available in a limited set of circumstances; new firms, whatever their origins, are always free to simply file the regular Form 1 registration application.

I support the objectives of Form 4, and, I appreciate the staff time and effort that has gone into this project.

 

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