[Federal Register Volume 68, Number 215 (Thursday, November 6, 2003)]
[Notices]
[Pages 62860-62861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27992]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48730; File No. PCAOB-2003-05]
Public Company Accounting Oversight Board; Order Approving
Proposed Rules Relating to Compliance With Auditing and Related
Professional Practice Standards and Advisory Groups
October 31, 2003.
I. Introduction
On July 14, 2003, the Public Company Accounting Oversight Board
(the ``Board'' or the ``PCAOB'') filed with the Securities and Exchange
Commission (the ``Commission'') proposed rules PCAOB-2003-05 pursuant
to Sections 101, 103 and 107 of the Sarbanes-Oxley Act of 2002 (the
``Act'') \1\, relating to compliance with auditing and related
professional practice standards and to advisory groups. Notice of the
proposed rules was published in the Federal Register on September 26,
2003.\2\ The Commission received two comment letters. For the reasons
discussed below, the Commission is granting approval of the proposed
rules.
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\1\ 15 U.S.C. 7201, et seq.
\2\ Release No. 34-48511 (September 22, 2003); 68 FR 55667
(September 26, 2003).
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II. Description
Section 103 of the Act directs the PCAOB to establish auditing and
related attestation standards, quality control standards, and ethics
standards to be used by registered public accounting firms in the
preparation and issuance of audit reports as required by the Act or the
rules of the Commission. Section 103 also gives the PCAOB authority to
convene advisory groups to assist the Board in its establishment of
auditing and related professional practice standards.
In furtherance of these provisions, the PCAOB proposed rules to
define the term ``auditing and related professional practice
standards'' (``Standards'') to mean the standards established or
[[Page 62861]]
adopted by the Board under Section 103(a) of the Act. Also, while
implicit in the Act, the Board's proposed rules codify the requirement
that all registered public accounting firms must comply with the
Board's Standards. Pursuant to its authority to convene advisory groups
and in order to obtain the advice of a broad range of experts, the
Board's proposed rules also provide general guidelines for the creation
of advisory groups.
The PCAOB adopted the proposed rules on June 30, 2003 and filed
them with the Commission's Office of the Secretary on July 14, 2003.
Pursuant to the requirements of Section 107(b) of the Act and Section
19(b) of the Securities Exchange Act of 1934 (the ``Exchange Act''),
the Commission published the proposed rules for public comment on
September 26, 2003.
The PCAOB's proposed rules include two rules (PCAOB Rules 3100 and
3700) and a definition that would appear in Rule 1001. Proposed PCAOB
Rule 1001(a)(viii) defines ``auditing and related professional practice
standards'' as the auditing standards, related attestation standards,
quality control standards, ethical standards, and independence
standards (including any rules implementing Title II of the Act), and
any other professional standards, that are established or adopted by
the Board under Section 103 of the Act. Proposed Rule 3100 codifies the
obligation of registered public accounting firms to comply with the
Standards. While this obligation is implicit in Section 103(a)(1) of
the Act, adoption of Rule 3100 would mean that any registered public
accounting firm or person associated with such a firm that fails to
adhere to applicable Standards could be the subject of a Board
disciplinary proceeding. Proposed Rule 3700 establishes guidelines for
the formation, composition, and other basic matters concerning advisory
groups that will participate in the standards-setting process. Rule
3700 also provides that the Board may establish ad hoc task forces, the
members of which do not necessarily have to be members of an
established advisory group.
III. Discussion
In a comment letter dated October 17, 2003, the National
Association of State Boards of Accountancy (``NASBA'') urged that the
PCAOB, in its future rulemaking and oversight of public accounting
firms, emphasize the importance of compliance with state regulatory
requirements. As noted in the Commission's July 16, 2003 order \3\
approving the PCAOB's rules for registration of public accounting
firms, we appreciate NASBA's efforts to work with the PCAOB on auditor
regulation and oversight, and we believe that both the PCAOB and state
regulatory bodies will benefit from continued close cooperation. The
second comment letter, from the accounting firm of Deloitte & Touche
(October 17, 2003), contained suggestions for greater openness in the
activities of the PCAOB's standing advisory group, and requested more
notice of Board meetings, advisory group meetings and public
roundtables. The comments in this letter also did not appear to warrant
changes in the proposed rules.
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\3\ Release No. 34-48180 (July 10, 2003); 68 FR 43244 (July 21,
2003). Technical corrections in Release No. 34-48180A (July 22,
2003); 68 FR 44370 (July 28, 2003).
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Section 103 of the Act directs the PCAOB to establish auditing and
related professional practice standards and empowers the PCAOB to
convene advisory groups to assist it in fulfilling its standards-
setting responsibilities. The proposed rules will facilitate the
Board's exercise of its standards-setting authority and establish
guidelines for the Board's use of advisory groups in connection with
its standards-setting activities.
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rules are consistent with the requirements of the Act and the
securities laws and are necessary and appropriate in the public
interest and for the protection of investors.
It is therefore ordered, pursuant to Section 107 of the Act and
Section 19(b)(2) of the Exchange Act, that the proposed rules (File No.
PCAOB-2003-05) be and hereby are approved.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-27992 Filed 11-5-03; 8:45 am]
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