Chair Williams’ Statement on Amendment to Rule 2107, Withdrawal from Registration

Remarks as prepared for delivery. 

Today, we are considering an amendment to existing PCAOB Rule 2107, Withdrawal from Registration, that would strengthen investor protection by improving the quality of information provided on the PCAOB’s website. Specifically, this amendment would enable the Board to treat a registered firm’s failures to both file annual reports with the PCAOB and pay annual fees to the PCAOB for at least two consecutive reporting years as a constructive request for leave to withdraw and to deem the firm’s registration withdrawn.

The amendment would then allow the Board to withdraw the registration of a firm that no longer exists, is no longer operating, or no longer wishes to maintain its registration with the PCAOB.

Firm registration is a cornerstone of the PCAOB’s operations. Firms are required by the Sarbanes-Oxley Act to register with the PCAOB in order to perform audits of publicly traded companies and SEC-registered broker-dealers or to play a substantial role in those audits. 

In addition to registering, filing an annual report through what’s called Form 2, allows the PCAOB to keep track of the firms who are eligible to perform those audits and to understand which audits, if any, they are performing. In turn, the PCAOB then uses that information for many purposes, including planning its inspections program, which inspects over 800 issuer audits in more than 30 jurisdictions around the world each year. 

However, as of August 31, 2024, 80 registered firms had not filed annual reports and had not paid annual fees for both the 2022 and 2023 reporting years. These firms include, for example, sole proprietorships that remain registered even though the sole proprietor has died; firms that registered with the Board years ago but now appear to be defunct; and small firms, often in foreign countries, that cannot be reached through the primary contact person designated by the firm.

In 2010, 13 firms failed to file their annual reports and pay their annual fees, and those 13 firms have failed to file annual forms or pay annual fees every year thereafter through 2023. Each year, we add to the count of firms that are consistently non-compliant. 

A firm’s failure to meet the annual reporting and fee requirements prevents the PCAOB from maintaining an accurate list of registered firms that exist, are operating, and want to maintain their registration status. It also prevents the PCAOB from ensuring that Form 2 information is reported to the public for all registered firms. This means that the PCAOB's list of registered firms does not provide audit committees, investors, and other stakeholders with the most accurate list of firms that wish to maintain their registrations with the PCAOB and may increase the amount of work these stakeholders must do in selecting an auditor.

A firm’s failure to file can also create additional work for PCAOB staff trying to track down information from firms that may or may not be responsive.

After presenting the proposal in February and asking for public input, PCAOB staff made changes to the amendment based on the feedback we received, including a suggestion to give firms additional time to let the PCAOB know they want to remain registered.

If adopted, the amendment would give firms 60 days after written notice from the PCAOB to send an email to the PCAOB’s Registration staff to stop the withdrawal process and remain a PCAOB-registered firm. Our original proposal required that firms respond within 30 days. The extended time period is designed as an additional safeguard for firms that are delinquent but wish to remain registered. 

Auditors play a vital role in promoting trust in our capital markets. Maintaining that trust requires transparency and accountability, and this amendment would be another step toward improving the quality of information available to investors, audit committees, and other stakeholders on firms registered with the PCAOB.

I want to thank everyone who submitted public comments. Your input helped to shape this amendment.

I would also like to express my gratitude to those individuals who have significantly contributed to this proposal. Specifically, I would like to thank James Cappoli, Matt Goldin, Drew Dropkin, and Vince Meehan in the Office of the General Counsel; Hanna Lee, Min Ren, and Josh White in the Office of Economic and Risk Analysis; Carol Swaniker and Abena Glasgow in the Division of Registration and Inspections; and Noah Berlin in the Division of Enforcement and Investigations.

I would also like to thank my fellow Board Members and their staff for their contributions.

Finally, I would like to thank the SEC’s staff for their support and assistance.