[Federal Register Volume 81, Number 244 (Tuesday, December 20, 2016)]
[Notices]
[Pages 92885-92886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30537]


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SECURITIES AND EXCHANGE COMMISSION

[Securities Act of 1933 Release No. 10266/December 14, 2016; Securities 
Exchange Act of 1934 Release No. 79544/December 14, 2016]


Order Approving Public Company Accounting Oversight Board Budget 
and Annual Accounting Support Fee for Calendar Year 2017

    The Sarbanes-Oxley Act of 2002, as amended (the ``Sarbanes-Oxley 
Act''),\1\ established the Public Company Accounting Oversight Board 
(``PCAOB'') to oversee the audits of companies that are subject to the 
securities laws, and related matters, in order to protect the interests 
of investors and further the public interest in the preparation of 
informative, accurate and independent audit reports. Section 982 of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-
Frank Act'') \2\ amended the Sarbanes-Oxley Act to provide the PCAOB 
with explicit authority to oversee auditors of broker-dealers 
registered with the Commission. The PCAOB is to accomplish these goals 
through registration of public accounting firms and standard setting, 
inspection, and disciplinary programs. The PCAOB is subject to the 
comprehensive oversight of the Securities and Exchange Commission (the 
``Commission'').
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    \1\ 15 U.S.C. 7201 et seq.
    \2\ Public Law 111-203, 124 Stat. 1376 (2010).
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    Section 109 of the Sarbanes-Oxley Act provides that the PCAOB shall 
establish a reasonable annual accounting support fee, as may be 
necessary or appropriate to establish and maintain the PCAOB. Under 
Section 109(f) of the Sarbanes-Oxley Act, the aggregate annual 
accounting support fee shall not exceed the PCAOB's aggregate 
``recoverable budget expenses,'' which may include operating, capital 
and accrued items. The PCAOB's annual budget and accounting support fee 
are subject to approval by the Commission. In addition, the PCAOB must 
allocate the annual accounting support fee among issuers and among 
brokers and dealers.
    Section 109(b) of the Sarbanes-Oxley Act directs the PCAOB to 
establish a budget for each fiscal year in accordance with the PCAOB's 
internal procedures, subject to approval by the Commission. Rule 190 of 
Regulation P governs the Commission's review and approval of PCAOB 
budgets and annual accounting support fees.\3\ This budget rule 
provides, among other things, a timetable for the preparation and 
submission of the PCAOB budget and for Commission actions related to 
each budget, a description of the information that should be included 
in each budget submission, limits on the PCAOB's ability to incur 
expenses and obligations except as provided in the approved budget, 
procedures relating to supplemental budget requests, requirements for 
the PCAOB to furnish on a quarterly basis certain budget-related 
information, and a list of definitions that apply to the rule and to 
general discussions of PCAOB budget matters.
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    \3\ 17 CFR 202.190.
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    In accordance with the budget rule, in March 2016 the PCAOB 
provided the Commission with a narrative description of its program 
issues and outlook for the 2017 budget year. In response, the 
Commission provided the PCAOB with economic assumptions and budgetary 
guidance for the 2017 budget year. The PCAOB subsequently delivered a 
preliminary budget and budget justification to the Commission. Staff 
from the Commission's Office of the Chief Accountant and Office of 
Financial Management dedicated a substantial amount of time to the 
review and analysis of the PCAOB's programs, projects and budget 
estimates; reviewed the PCAOB's estimates of 2016 actual spending; and 
attended several meetings with management and staff of the

[[Page 92886]]

PCAOB to further develop their understanding of the PCAOB's budget and 
operations. During the course of this review, Commission staff relied 
upon representations and supporting documentation from the PCAOB. Based 
on this review, the Commission issued a ``pass back'' letter to the 
PCAOB. On November 17, 2016, the PCAOB approved its 2017 budget during 
an open meeting, and subsequently submitted that budget to the 
Commission for approval.
    After considering the above, the Commission did not identify any 
proposed disbursements in the 2017 budget adopted by the PCAOB that are 
not properly recoverable through the annual accounting support fee, and 
the Commission believes that the aggregate proposed 2017 annual 
accounting support fee does not exceed the PCAOB's aggregate 
recoverable budget expenses for 2017. The Commission also acknowledges 
the PCAOB's updated strategic plan and encourages the PCAOB to continue 
keeping the Commission and its staff apprised of significant new 
developments. The Commission looks forward to providing views to the 
PCAOB as future updates are made to the plan. In addition, the PCAOB 
should submit its 2016 annual report to the Commission by April 1, 
2017.
    We understand that the Board continues to take steps to implement 
improvements to the performance and management of the PCAOB's standard-
setting process. The Commission directs the PCAOB to continue to 
provide timely updates throughout the year on the progress of this 
initiative as well as on any significant recommended or anticipated 
changes to processes or funding.
    The Commission emphasizes the importance of the PCAOB's identifying 
efficiencies, process improvements, and cost savings wherever possible. 
Accordingly, the Commission directs the Board to conduct a study 
assessing its operational efficiency and budgetary needs and submit a 
supplemental report to the Commission of the Board's assessment in 
connection with the start of the 2018 budget cycle. The report should 
identify any areas where specific savings may be achieved while 
continuing to enable the PCAOB to fully perform its mission. The PCAOB 
should submit the report to the Commission along with its 2018 
budgetary outlook letter.
    As part of its review of the 2017 budget, the Commission notes that 
the Board's management of the Center for Economic Analysis (``Center'') 
should continue to advance the PCAOB's mission. The Commission directs 
the PCAOB during 2017 to continue providing quarterly updates to the 
Commission on the Center's activities and progress towards its stated 
goals.
    The Commission directs the Board during 2017 to continue to provide 
in its quarterly reports to the Commission detailed information about 
the state of the PCAOB's information technology (``IT'') program, 
including planned, estimated, and actual costs for IT projects, and the 
level of involvement of consultants. These reports also should continue 
to include: (a) A discussion of the Board's assessment of the IT 
program; and (b) the quarterly IT report that is prepared by PCAOB 
staff and submitted to the Board.
    The Commission also directs the Board during 2017 to continue to 
include in its quarterly reports to the Commission information about 
the PCAOB's inspections program. Such information is to include: (a) 
Statistics relative to the numbers and types of firms budgeted and 
expected to be inspected in 2017, including by location and by year the 
inspections are required to be conducted in accordance with the 
Sarbanes-Oxley Act and PCAOB rules; (b) information about the timing of 
the issuance of inspections reports for domestic and non-U.S. 
inspections; and (c) updates on the PCAOB's efforts to establish 
cooperative arrangements with respective non-U.S. authorities for 
inspections required in those countries.
    The Commission understands that the Office of Management and Budget 
(``OMB'') has determined the 2017 budget of the PCAOB to be 
sequestrable under the Budget Control Act of 2011.\4\ For 2016, the 
PCAOB sequestered $16 million. That amount will become available in 
2017. For 2017, the sequestration amount will be $17 million. 
Accordingly, the PCAOB should submit a revised spending plan for 2017 
reflecting a $1 million reduction to budgeted expenditures as a result 
of the increase in sequestration amount from 2016 to 2017.
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    \4\ See ``OMB Report to the Congress on the Joint Committee 
Reductions for Fiscal Year 2017'', Appendix page 15 of 16 at: 
https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/jc_sequestration_report_2017_house.pdf.
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    The Commission has determined that the PCAOB's 2017 budget and 
annual accounting support fee are consistent with Section 109 of the 
Sarbanes-Oxley Act. Accordingly,
    It is ordered, pursuant to Section 109 of the Sarbanes-Oxley Act, 
that the PCAOB budget and annual accounting support fee for calendar 
year 2017 are approved.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2016-30537 Filed 12-19-16; 8:45 am]
 BILLING CODE 8011-01-P