Document ID: SEC-2010-2004-0001
Agency: sec
Document Type: Notice
Title: Approval of Public Company Accounting Oversight Board and Annual Accounting Support Fee for Calendar year 2011
Posted Date: 2010-12-28T05:00Z

[Federal Register Volume 75, Number 248 (Tuesday, December 28, 2010)]
[Notices]
[Pages 81684-81685]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32650]

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SECURITIES AND EXCHANGE COMMISSION

[Securities Act of 1933, Release No. 33-9168/December 22, 2010; 
Securities Exchange Act of 1934; Release No. 34-63596/December 22, 
2010]

Order Approving Public Company Accounting Oversight Board Budget 
and Annual Accounting Support Fee for Calendar Year 2011

    The Sarbanes-Oxley Act of 2002, as amended (the ``Sarbanes-Oxley 
Act''), 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. 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'').
    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 Commission must approve the PCAOB's annual 
budget and accounting support fee.
    Section 982 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Dodd-Frank Act'') \1\ amended the Sarbanes-Oxley 
Act to provide the PCAOB with explicit authority to oversee auditors of 
broker-dealers registered with the Commission. In addition, the PCAOB 
must allocate the annual accounting support fee among issuers and among 
brokers and dealers, beginning in 2011. The 2011 budget approved and 
submitted by the Board includes an allocation of the annual accounting 
support fee among issuers and brokers and dealers.
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
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    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. The 
Commission's Rules of Practice related to its Informal and Other 
Procedures include a rule that facilitates the Commission's review and 
approval of PCAOB budgets and the annual accounting support fee.\2\ 
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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    \2\ 17 CFR 202.190. See Release No. 33-8724 (July 18, 2006) [71 
FR 41998 (July 24, 2006)].
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    In accordance with the budget rule, in March 2010 the PCAOB 
provided the Commission with a narrative description of its program 
issues and outlook for the 2011 budget year. In response, the 
Commission provided the PCAOB with economic assumptions and budgetary 
guidance for the 2011 budget year. The PCAOB subsequently delivered a 
preliminary budget and budget justification to the Commission. Staff 
from the Commission's Offices of the Chief Accountant and Executive 
Director 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 2010 actual spending; and attended 
several meetings with management and staff of the PCAOB to further 
develop an 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

[[Page 81685]]

to the PCAOB. The PCAOB approved its 2011 budget during an open meeting 
on November 23, 2010 and submitted that budget for Commission approval 
on November 29, 2010.
    After considering the above, the Commission did not identify any 
proposed disbursements in the 2011 budget adopted by the PCAOB that are 
not properly recoverable through the annual accounting support fee, and 
the Commission believes that the aggregate proposed 2011 annual 
accounting support fees do not exceed the PCAOB's aggregate recoverable 
budget expenses for 2011. The Commission looks forward to the PCAOB's 
annual updating of its strategic plan and the opportunity for the 
Commission to review and provide views to the PCAOB on a draft of the 
updated plan.
    In its role as the oversight body of the PCAOB, the Commission is 
aware of the various uncertainties the PCAOB faces with respect to 
budgeting its resources and the potential impact if actual experience 
deviates from budget assumptions. Further, the Commission believes that 
the 2011 budget approved and submitted by the Board provides sufficient 
resources and flexibility for the PCAOB to continue to fulfill its 
mandate and to respond to changes in the assumptions upon which the 
budget is based. Should the PCAOB find the need to reallocate 
resources, the PCAOB should work closely with Commission staff on 
whether any reprogramming efforts result in the need for a supplemental 
budget request under the Commission's budget rule. In considering any 
reallocation that may be necessary in 2011, the Commission encourages 
the Board to identify expenditures in its 2011 budget where flexibility 
exists.
    As part of its review of the PCAOB's 2011 budget, the Commission 
notes that there are certain budget-related matters that should be 
addressed or more closely monitored during 2011 related to: (1) The 
PCAOB's inspections program; (2) its information technology programs; 
and (3) the impact of implementing legislative and other actions on the 
PCAOB. Accordingly, the Commission directs the PCAOB during the 2011 
budget cycle to:
    (1) Continue to include in its quarterly reports to the Commission 
information about the PCAOB's inspections program. Such information 
will include (a) statistics relative to the numbers and types of firms 
budgeted and expected to be inspected in 2011, including by location 
and by year the inspections that 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.
    (2) Continue to include detailed information about the state of the 
PCAOB's information technology in its quarterly reports to the 
Commission, including planned, estimated, and actual costs for 
information technology projects. Such information should also include 
project plans, life cycle costs and progress, and provide an indication 
of the level and nature of involvement of consultants.
    (3) Consult with the Commission about the PCAOB's plans for 
implementing changes in response to legislative actions, advisory 
committees, or consultant reports.
    The Commission has determined that the PCAOB's 2011 budget and 
annual accounting support fee are consistent with Section 109 of the 
Act. Accordingly,
    It is ordered, pursuant to Section 109 of the Act, that the PCAOB 
budget and annual accounting support fee for calendar year 2011 are 
approved.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-32650 Filed 12-27-10; 8:45 am]
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