Statement in Support of the Amendment Regarding Constructive Requests to Withdraw from Registration

Remarks as prepared for delivery

Thank you, Chair Williams.

I support amending PCAOB Rule 2107 to add a mechanism that allows the Board to increase the usefulness of public information on our website about registered firms.

Under section 102 of the Sarbanes-Oxley Act, firms that prepare or issue audit reports,¹ or firms that play a substantial role in the preparation or issuance of audit reports, must be registered with the PCAOB.²

Registration with the PCAOB comes with responsibilities. One of those responsibilities is that a registered firm must file an annual report on Form 2 with the PCAOB. Annual reports on Form 2, which are available on our public website, inform the public about a registered firm’s practice, including: the identity of clients to which the firm has issued an audit report, and details about fees the firm has billed to its issuer clients for audit services, other accounting services, tax services, and non-audit services. Another responsibility of registered firms is to pay an annual fee each year. Under the Sarbanes-Oxley Act, the Board must assess and collect annual fees to recover costs associated with processing and reviewing annual reports.³ For most firms, the registration fee is $500; however, larger firms must pay a higher fee.⁴ Similar to the responsibilities that CPAs have to report information and pay a fee to their state accountancy boards, registered firms must comply with annual reporting and fee payment responsibilities to the PCAOB; those responsibilities should not be ignored. Compliance with these requirements promotes investor interest, including by ensuring that recent data about a registered firm’s practice is publicly available.

Based on our oversight activities, we have found that certain firms are persistently delinquent in meeting their responsibilities:  they fail to both file their annual report and pay their annual fee for consecutive reporting years. Each year, our diligent staff in the Division of Registration and Inspections sends out multiple notices and reminders to these consecutively delinquent firms and, in the vast majority of cases, our staff does not receive a response from such firms. Our staff should not have to chase delinquent firms in perpetuity.

It is possible that many of these firms are defunct. However, given that year after year the number of delinquent firms increases, the amendment before us today makes sense. Treating non-compliance with our annual reporting and fee payment requirements as a constructive request for withdrawal, and then deeming such firms withdrawn, will enable the Board to have more useful and informative registration records, and will result in time efficiencies, which will enable the Board to better utilize and deploy staff resources.

As many of you know, my decades of executive experience in mission-focused government roles required me to lead people and significant and consequential programs. I am a strong proponent of effective resource management that enables mission critical work to be executed more efficiently, particularly when it advances a public good.

In this case, it would be good to have registration records that do not include defunct firms; stakeholders who rely on our registration information would have greater confidence in our data. Additionally, it would be good if some of our staff time could be redirected from chasing delinquent firms to other mission critical functions. As such, I fully support the spirit and purpose of the current amendment.

In closing, I want to thank commenters for taking the time to provide valuable insight with respect to this project.

Additionally, I want to thank the dedicated teams who contributed to this rulemaking project. Specifically, from the Office of the General Counsel, my sincere thanks to James Cappoli, Matt Goldin, Drew Dropkin, and Vince Meehan. From our Division of Registration and Inspection, I want to thank the dedicated staff of the Registration team, including Carol Swaniker and Abena Glasgow. From the Office of Economic and Risk Analysis, my sincere thanks to Martin Schmalz, Eric Durbin, Josh White, Hanna Lee, and Min Ren. Also, I want to thank my fellow Board members and my staff for their time and attention to this project. And finally, I would like to thank the staff in the SEC’s Office of the Chief Accountant for their assistance with this project.