Statement in Support of the Adoption of Constructive Requests to Withdraw from Registration

Remarks as prepared for delivery

Good afternoon and thank you, Chair Williams.

I am pleased to support the adoption of new paragraph (h) of Rule 2107, Withdrawal from Registration, concerning constructive withdrawal requests.

One area of focus for me over the past year has been the need for increased transparency. I believe that improved transparency and accessibility of PCAOB oversight activities on our website, in particular registration and inspection information, will help to better inform and equip investors, audit committee members, academics, and other stakeholders to not only understand our work but also to make better informed decisions. While I am hopeful for more efforts in this regard, I have been pleased with our work to date.

Hand in hand with promoting transparency comes the responsibility to do our best to ensure that the information on the PCAOB’s website is not only accurate, but also useful and informative to a wide variety of stakeholders.

The registration process is at the heart of our oversight activities and the accuracy of the related firm information is essential to allow us to fulfill our statutory mission to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. Users of our registration data deserve accurate and current information. Accordingly, in addition to a required annual fee, PCAOB rules mandate that each registered firm file an annual report (Form 2).

There are a myriad of reasons why a firm may not be current filing its Form 2 and paying its annual fee, and Registration staff can work with firms to resolve them. But Registration staff resources are not being deployed effectively when they must send reminder communications to registered firms that have neither filed their annual reports nor paid their annual fees for multiple years. The PCAOB’s current strategic plan includes a goal for organizational effectiveness; the amendment before us today will allow us to use our resources more effectively. This rule amendment is a sensible and practical approach for all parties.

While I am pleased to support this amendment to Rule 2107, I am also pleased the amendment includes several safeguards to ensure withdrawal is consistent with a firm’s intent. First, this rule is only activated if a registered firm misses at least two consecutive Form 2 reporting years and has not paid the fees for those years. Second, the Board in its discretion commences the Rule 2107(h) process by sending a written “Notice of Delinquency and Impending Withdrawal” to the registered firm’s primary contact with the Board. This provides the firm notice of the commencement of the Rule 2107(h) process, the reason for the commencement of that process, its potential significance for the firm’s registration, and the firm’s opportunity to avoid withdrawal by sending an email to the Registration staff within 60 days. The Board will also note the firm’s status on the PCAOB website. Firms will have at least two means of being made aware of the Board’s planned action – direct communication and notice on the public website.

The operation of Rule 2107(h) is tantamount to any other withdrawal from PCAOB registration. For example, the firm would be prohibited from engaging in the preparation or issuance of an audit report for an issuer or broker-dealer, or playing a substantial role. Likewise, a withdrawal under Rule 2107(h) would be reflected on the PCAOB’s website as a withdrawal from registration and would not be reported as a disciplinary sanction. The firm would also retain the ability to perform work on audits of issuers and broker-dealers provided the work remains below the substantial role threshold. The firm could also seek to re-register in the future by using Form 1. These mechanisms are all practical and are akin to a firm-initiated withdrawal as opposed to the Board-initiated revocation.

Conclusion

In my statement in support of this rule at proposal, I noted that the PCAOB’s registration provisions provide the gateway for accounting firms to perform audits of public company financial statements and to serve their vitally important role to support our capital markets. Efforts like this amendment make our registration information more useful for stakeholders and support our public interest mission.

I want to thank all those who took the time and effort to submit comment letters. Your comments are always valuable and help us arrive at better conclusions.

And thank you to the staff for their dedication and work on this project and responses to my questions throughout the process. I extend my gratitude to James Cappoli, Matt Goldin, Drew Dropkin, and Vince Meehan in the Office of the General Counsel; Martin Schmalz, Erik Durbin, Josh White, Hanna Lee, and Min Ren, in the Office of Economic and Risk Analysis; and Carol Swaniker and Abena Glasgow in the Division of Registration and Inspections. I also want to thank the staff from other offices and divisions, including John Abell, Bill Ryan, and Noah Berlin in the Division of Enforcement and Investigations.