Accounting Watchdog Lets Companies Escape Its Clutches
Published Date: 1/7/2025
Notice
Summary
The Public Company Accounting Oversight Board (PCAOB) got the green light to approve new rules that make it easier for accounting firms to withdraw their registration when they want to. This change mainly affects accounting firms registered with the PCAOB and helps clear up confusion about how to properly step away. The new rules kick in right away and aim to protect investors while keeping things smooth and simple.
Analyzed Economic Effects
5 provisions identified: 3 benefits, 2 costs, 0 mixed.
Two-Year Rule Can De-Register Firms
If your accounting firm is registered with the PCAOB, the Board can deem your registration withdrawn if your firm fails to both file an annual report (PCAOB Form 2) and pay annual fees for at least two consecutive reporting years. That constructive withdrawal can result from two years of simultaneous failures to file and pay.
60-Day Notice Gives Firms a Cure Window
Before deeming a firm withdrawn, the PCAOB will send a written Notice of Delinquency and Impending Withdrawal to the firm's primary contact and publish notice on its website. The firm then has 60 days to email PCAOB registration staff saying it wishes to remain registered to stop the withdrawal process.
When the Rule Starts Affecting Firms
The Amendment is effective for annual reports and fees due in 2025. A firm that does not file and pay in 2025 and 2026 could have its registration deemed withdrawn beginning in the fall of 2026.
Deemed Withdrawal Is Not a Disciplinary Sanction
Withdrawal under the new Rule 2107(h) is treated as a withdrawal, not a disciplinary sanction. A firm whose registration is withdrawn may still perform audit work so long as its role stays below the Rule 1001(p)(ii) substantial-role threshold, and may reissue or consent to use prior audit reports issued while it was registered.
Better Public Records Help Emerging Growth Companies
The Commission agreed the Amendment should apply to audits of Emerging Growth Companies (EGCs). Removing consecutively delinquent firms from the registry aims to improve the accuracy of auditor listings and may reduce search costs for EGC audit committees that are finding and selecting PCAOB-registered firms.
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Key Dates
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