Document ID: SEC-2021-1314-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Public Company Accounting Oversight Board
Posted Date: 2021-09-28T04:00Z

[Federal Register Volume 86, Number 185 (Tuesday, September 28, 2021)]
[Notices]
[Pages 53699-53718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21056]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93112; File No. PCAOB-2021-01]

Public Company Accounting Oversight Board; Notice of Filing of 
Proposed Rule on Board Determinations Under the Holding Foreign 
Companies Accountable Act

September 23, 2021.
    Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002 (the 
``Act''), notice is hereby given that on September 23, 2021, the Public 
Company Accounting Oversight Board (the ``Board'' or ``PCAOB'') filed 
with the Securities and Exchange Commission (the ``Commission'' or 
``SEC'') the proposed rule described in items I and II below, which 
items have been prepared by the Board. The Commission is publishing 
this notice to solicit comments on the proposed rule from interested 
persons.

I. Board's Statement of the Terms of Substance of the Proposed Rule

    On September 22, 2021, the Board adopted PCAOB Rule 6100, Board 
Determinations Under the Holding Foreign Companies Accountable Act (the 
``proposed rule''). The text of the proposed rule appears in Exhibit A 
to the SEC Filing Form 19b-4 and is available on the Board's website at 
https://pcaobus.org/about/rules-rulemaking/rulemaking-dockets/docket-048-proposed-rule-governing-board-determinations-under-holding-foreign-companies-accountable-act and at the Commission's Public Reference 
Room.

II. Board's Statement of the Purpose of, and Statutory Basis for, the 
Proposed Rule

    In its filing with the Commission, the Board included statements 
concerning the purpose of, and basis for, the proposed rule and 
discussed comments it received on the proposed rule. The text of these 
statements may be examined at the places specified in Item IV below. 
The Board has prepared summaries, set forth in Sections A, B, C, and D 
below, of the most significant aspects of such statements. In addition, 
the Board is requesting that the Commission determine that Section 
103(a)(3)(C) of the Act does not apply to the proposed rule. The 
Board's conclusion in this regard is set forth in Section D.

A. Board's Statement of the Purpose of, and Statutory Basis for, the 
Proposed Rule

(a) Purpose
    The Act mandates that the Board inspect registered public 
accounting firms and investigate possible statutory, rule, and 
professional standards violations committed by those firms and their 
associated persons. That mandate applies with equal force to the 
Board's oversight of registered firms in the United States and in 
foreign jurisdictions.
    Over the course of more than a decade, the Board has worked 
effectively with authorities in foreign jurisdictions to fulfill its 
mandate to oversee registered firms located outside the United States. 
With rare exceptions, foreign audit regulators have cooperated with the 
Board and allowed it to exercise its oversight authority as it relates 
to registered firms located within

[[Page 53700]]

their respective jurisdictions. The norms of international comity have 
guided those efforts and allowed the Board to work cooperatively across 
borders, to resolve conflicts of law, and to overcome other potential 
obstacles. The Board benefits greatly from cross-border cooperation 
with its international counterparts and has built constructive 
relationships that facilitate meaningful oversight. Authorities in a 
limited number of foreign jurisdictions, however, have taken positions 
that deny the Board the access it needs to conduct its mandated 
oversight activities.
    Recognizing the ongoing obstacles to Board inspections and 
investigations in certain foreign jurisdictions, Congress enacted the 
Holding Foreign Companies Accountable Act (``HFCAA'').\1\ The HFCAA 
requires that the Board determine whether it is unable to inspect or 
investigate completely registered public accounting firms located in a 
foreign jurisdiction because of a position taken by one or more 
authorities in that jurisdiction. The HFCAA, among other things, also 
mandates that, after the Board makes such a determination, the 
Commission shall require covered issuers \2\ who retain such firms to 
make certain disclosures in their annual reports and, eventually, if 
certain conditions persist, shall prohibit trading in those issuers' 
securities.\3\
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    \1\ Public Law 116-222, 134 Stat. 1063 (Dec. 18, 2020).
    \2\ See HFCAA Sec.  2(i)(1)(A), 15 U.S.C. 7214(i)(1)(A) 
(defining ``covered issuer''). An ``issuer,'' as that term is used 
here, is distinct from a ``covered issuer,'' and is defined in 
Section 2(a)(7) of the Act.
    \3\ See generally Holding Foreign Companies Accountable Act 
Disclosure, SEC Exchange Act Release No. 91364 (Mar. 18, 2021).
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    Following public comment, the Board adopted the proposed rule, with 
some modifications after consideration of comments, to establish a 
framework for the Board to make its determinations under the HFCAA. The 
proposed rule establishes the manner of the Board's determinations; the 
factors the Board will evaluate and the documents and information it 
will consider when assessing whether a determination is warranted; the 
form, public availability, effective date, and duration of such 
determinations; and the process by which the Board will reaffirm, 
modify, or vacate any such determinations.
(b) Statutory Basis
    The statutory basis for the proposed rule is Title I of the Act.

B. Board's Statement on Burden on Competition

    Not applicable. The Board's consideration of the economic impacts 
of the proposed rule is discussed in Section D below.

C. Board's Statement on Comments on the Proposed Rule Received From 
Members, Participants or Others

Rulemaking History
    On May 13, 2021, the Board proposed a new rule that would establish 
a framework for the Board's determinations under the HFCAA.\4\ The 
Board received eight comments on the proposal from commenters across a 
range of affiliations.\5\ Commenters generally noted that the Board's 
statutorily mandated oversight activities--including the Board 
inspections and investigations referenced in the HFCAA--promote audit 
quality and enhance the quality of financial reporting, which serve to 
protect investors and further the public interest. The proposed rule is 
informed by the comments received. The proposed rule also takes into 
account observations based on PCAOB oversight activities.
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    \4\ See PCAOB Rel. No. 2021-001, Proposed Rule Governing Board 
Determinations Under the Holding Foreign Companies Accountable Act 
(May 13, 2021).
    \5\ The comment letters on the proposal are available on the 
Board's website in Rulemaking Docket No. 048, available at https://pcaobus.org/about/rules-rulemaking/rulemaking-dockets/docket-048-proposed-rule-governing-board-determinations-under-holding-foreign-companies-accountable-act. During the comment period, Board members 
and staff discussed the proposal during a webinar for investors on 
international issues, a transcript of which also is available in 
Rulemaking Docket No. 048.
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Background
The Board's Oversight of Non-U.S. Registered Public Accounting Firms 
Through Board Inspections and Investigations
    Section 102 of the Act prohibits public accounting firms that are 
not registered with the Board from preparing or issuing, or from 
participating in the preparation or issuance of, audit reports with 
respect to issuers, brokers, or dealers.\6\ Implementing this 
prohibition, PCAOB Rule 2100, Registration Requirements for Public 
Accounting Firms, provides that each public accounting firm that 
prepares or issues an audit report with respect to an issuer, broker, 
or dealer, or plays a substantial role in the preparation or furnishing 
of such a report, must be registered with the Board.\7\
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    \6\ See Section 102(a) of the Act; see also Section 2(a)(7) of 
the Act & PCAOB Rule 1001(i)(iii) (defining ``issuer''); Section 
110(3) of the Act & PCAOB Rule 1001(b)(iii) (defining ``broker''); 
Section 110(4) of the Act & PCAOB Rule 1001(d)(iii) (defining 
``dealer'').
    \7\ See PCAOB Rule 2100; see also PCAOB Rule 1001(p)(ii) 
(defining ``play a substantial role in the preparation or furnishing 
of an audit report'').
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    These provisions apply equally to U.S. and non-U.S. public 
accounting firms. Section 106 of the Act provides that any non-U.S. 
public accounting firm that prepares or furnishes an audit report with 
respect to an issuer, broker, or dealer is subject to the Act and to 
the Board's rules ``in the same manner and to the same extent'' as a 
U.S. public accounting firm.\8\ Therefore, non-U.S. firms issuing such 
reports must register with the Board. Section 106 of the Act further 
authorizes the Board to require non-U.S. firms that do not issue such 
reports but that play a substantial role in the preparation or 
furnishing of such reports to register with the Board,\9\ and the Board 
exercised that authority when it adopted Rule 2100.\10\
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    \8\ Section 106(a)(1) of the Act.
    \9\ See Section 106(a)(2) of the Act.
    \10\ See PCAOB Rule 2100. Section 106(c) of the Act allows the 
Board, subject to Commission approval, to exempt a non-U.S. firm or 
any class of such firms from any provision of the Act or the Board's 
rules, upon a determination that doing so is necessary or 
appropriate in the public interest or for the protection of 
investors. In connection with the launch of its oversight system in 
2003, the Board received numerous requests that non-U.S. firms be 
exempted from the Board's oversight requirements, but the Board 
declined to adopt any such exemptions, finding such exemptions to be 
inconsistent with its mandate to protect investors. See, e.g., 
Registration System for Public Accounting Firms, PCAOB Rel. No. 
2003-007, at 13, 17-20 (May 6, 2003); see also, e.g., Final Rule 
Concerning the Timing of Certain Inspections of Non-U.S. Firms, and 
Other Issues Relating to Inspections of Non-U.S. Firms, PCAOB Rel. 
No. 2009-003, at 9 n.23 (June 25, 2009).
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    Thus, by virtue of Section 106 of the Act and Rule 2100, non-U.S. 
firms are subject to the same registration requirements as U.S. firms, 
and, once registered, they are subject to the same oversight as U.S. 
firms. This oversight includes Board inspections at mandated regular 
intervals and Board investigations.
The Board's Inspection Mandate
    The Act mandates that the Board administer a continuing program of 
inspections that assesses registered firms' and their associated 
persons' compliance with the Act, the rules of the Board, the rules of 
the Commission, and professional standards in connection with the 
performance of audits, the issuance of audit reports, and related 
matters involving issuers.\11\

[[Page 53701]]

Board inspections are the Board's ``primary tool of oversight.'' \12\
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    \11\ See Section 104(a)(1) of the Act; see also Section 
101(c)(3) of the Act; PCAOB Rule 4000(a), General. The Act also 
permits the Board to establish, by rule, a program of inspection 
with respect to registered firms that provide one or more audit 
reports for a broker or dealer. See Section 104(a)(2) of the Act. 
The Board's rules provide for an interim inspection program related 
to audits of brokers and dealers. See PCAOB Rule 4020T, Interim 
Inspection Program Related to Audits of Brokers and Dealers.
    \12\ PCAOB Rel. No. 2009-003, at 8-9; see also Order Approving 
Proposed Amendment to Board Rules Relating to Inspections, SEC 
Exchange Act Release No. 61649, at 5 (Mar. 4, 2010) (observing that 
inspections are ``the cornerstone of the Board's regulatory 
oversight of audit firms'').
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    In accordance with the Act, and as set forth in the Board's rules, 
the Board periodically inspects the audits of registered public 
accounting firms.\13\ Board inspections must be performed annually with 
respect to each registered firm that regularly provides audit reports 
for more than 100 issuers, and at least triennially with respect to 
each registered firm that regularly provides audit reports for 100 or 
fewer issuers.\14\ The Board also may conduct special inspections on 
its own initiative or at the Commission's request.\15\
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    \13\ See Section 104(a)(1) of the Act. Generally, a registered 
firm's issuance of an audit report triggers a PCAOB inspection, 
subject to certain limited exceptions. See Section 104(b)(1) of the 
Act; PCAOB Rules 4003(a)-(b), Frequency of Inspections; see also 
PCAOB Rules 4003(c) & (e) (identifying certain circumstances in 
which the Board has discretion to forgo an inspection of a firm). 
Additionally, the Board conducts inspections of firms that have not 
issued an audit report with respect to an issuer but have played a 
substantial role in the preparation or furnishing of such a report. 
See PCAOB Rule 4003(h).
    \14\ See Section 104(b)(1) of the Act; see also PCAOB Rules 
4003(a)-(b). The Act provides that the Board, by rule, may adjust 
the annual and triennial inspection schedules if the Board finds 
that different schedules are consistent with the purposes of the 
Act, the public interest, and the protection of investors. See 
Section 104(b)(2) of the Act; see also PCAOB Rules 4003(d)-(g) 
(adjusting the inspection schedule in certain circumstances).
    \15\ See Section 104(b)(2) of the Act.
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    During an inspection, the Board reviews audit engagements 
``selected by the Board.'' \16\ The Board also evaluates the 
sufficiency of the firm's quality control system (and the documentation 
and communication of that system), and may perform other testing of the 
firm's audit, supervisory, and quality control procedures as deemed 
necessary or appropriate in light of the purpose of the inspection and 
the responsibilities of the Board.\17\
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    \16\ Section 104(d)(1) of the Act.
    \17\ See Sections 104(d)(2) and 104(d)(3) of the Act.
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    To conduct an inspection, the Board must obtain documents and 
information from the firm and its associated persons, and when the 
Board requests such documents or information, registered firms and 
their associated persons must comply. In this regard, the Act provides 
that a firm's cooperation in and compliance with document requests made 
in furtherance of the Board's authority and responsibilities under the 
Act are a condition to the continuing effectiveness of the firm's 
registration with the Board.\18\ Furthermore, PCAOB Rule 4006, Duty to 
Cooperate With Inspectors, imposes on registered firms and their 
associated persons a duty to cooperate with PCAOB inspectors, which 
includes complying with requests for access to, and the ability to 
copy, any record in their possession, custody, or control, and with 
requests for information by oral interviews, written responses, or 
otherwise.\19\
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    \18\ See Section 102(b)(3) of the Act. Section 102(b)(3)(A) of 
the Act specifies that each registration application shall contain 
``a consent executed by the . . . firm to cooperation in and 
compliance with any request for . . . documents made by the Board in 
the furtherance of its authority and responsibilities'' under the 
Act. Section 102(b)(3)(B) of the Act, in turn, provides that each 
registration application shall contain a statement that the firm 
``understands and agrees that [such] cooperation and compliance . . 
. shall be a condition to the continuing effectiveness of the 
registration of the firm with the Board.''
    \19\ See PCAOB Rule 4006; see also Gately & Assocs., LLC, SEC 
Exchange Act Release No. 62656, at 9 (Aug. 5, 2010) (``The 
obligations under Rule 4006 are unequivocal, and apply to `any 
request[ ] made in furtherance of the Board's authority and 
responsibilities. ' '' (quoting Rule 4006)). Documents and 
information prepared or received by or specifically for the Board in 
connection with an inspection are confidential and privileged as an 
evidentiary matter, but the Board may share them with the Commission 
and, under certain circumstances, with the Attorney General of the 
United States, certain federal regulators, state attorneys general, 
certain state regulators, and certain self-regulatory organizations. 
See Section 105(b)(5)(B) of the Act.
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The Board's Investigation Mandate
    The Act also authorizes the Board to conduct investigations (and, 
relatedly, disciplinary proceedings) with respect to registered firms 
and their associated persons.\20\ The Board may investigate any act, 
practice, or omission to act by a registered firm or associated person 
that may violate the Act, the rules of the Board, the provisions of the 
securities laws relating to the preparation and issuance of audit 
reports and the obligations and liabilities of accountants with respect 
thereto, including the rules of the Commission issued under the Act, or 
professional standards, regardless of how the act, practice, or 
omission came to the Board's attention.\21\
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    \20\ See Section 101(c)(4) of the Act; see also Section 105(a) 
of the Act.
    \21\ See Section 105(b)(1) of the Act.
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    As with inspections, the Board's ability to conduct investigations 
depends on the Board's ability to obtain documents and information from 
registered firms and their associated persons. Pursuant to the Act,\22\ 
the Board has adopted rules under which the Board may (1) require 
testimony of a registered firm or an associated person thereof with 
respect to any matter that the Board considers relevant or material to 
an investigation; \23\ (2) require production of audit work papers and 
any other document or information possessed by a registered firm or 
associated person, wherever domiciled, that the Board considers 
relevant or material to an investigation; \24\ (3) inspect the books or 
records of a registered firm or associated person to verify the 
accuracy of any documents or information supplied; \25\ (4) request the 
testimony of, or any document in the possession of, any other person 
that the Board considers relevant or material to an investigation, 
subject to certain limitations; \26\ and (5) seek issuance by the 
Commission, in a manner established by the Commission, of a subpoena 
requiring the testimony of, or the production of any document in the 
possession of, any person that the Board considers relevant or material 
to an investigation.\27\
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    \22\ See Section 105(b)(2) of the Act.
    \23\ See PCAOB Rule 5102, Testimony of Registered Public 
Accounting Firms and Associated Persons in Investigations.
    \24\ See PCAOB Rule 5103, Demands for Production of Audit 
Workpapers and Other Documents from Registered Public Accounting 
Firms and Associated Persons.
    \25\ See PCAOB Rule 5104, Examination of Books and Records in 
Aid of Investigations.
    \26\ See PCAOB Rule 5105, Requests for Testimony or Production 
of Documents from Persons Not Associated with Registered Public 
Accounting Firms.
    \27\ See PCAOB Rule 5111, Requests for Issuance of Commission 
Subpoenas in Aid of an Investigation.
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    Pursuant to the Act, a firm's cooperation in and compliance with 
requests for testimony and for the production of documents made in 
furtherance of the Board's authority and responsibilities are a 
condition to the continuing effectiveness of the firm's registration 
with the Board.\28\ Moreover, if a registered firm or associated person 
refuses to testify, produce documents, or otherwise cooperate with a 
Board investigation, the Board can impose sanctions, which may include 
suspending or revoking a firm's registration and suspending or barring 
an individual from associating with a registered firm.\29\ As the 
Commission has observed, failing to cooperate in a

[[Page 53702]]

Board investigation is ``very serious misconduct.'' \30\
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    \28\ See Section 102(b)(3) of the Act.
    \29\ See Section 105(b)(3) of the Act; PCAOB Rule 5110, 
Noncooperation with an Investigation.
    \30\ R.E. Bassie & Co., SEC Accounting and Auditing Enforcement 
Release No. 3354, at 11 (Jan. 10, 2012).
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    The Act requires the Board to coordinate its investigations with 
the Commission. The Board must notify the Commission of any pending 
Board investigation that involves a potential violation of the 
securities laws, and must thereafter coordinate its work with the 
Commission's Division of Enforcement as necessary to protect any 
ongoing Commission investigation.\31\ The Act also authorizes the Board 
to refer an investigation to the Commission, a self-regulatory 
organization, certain other federal regulators, and, at the 
Commission's direction, certain attorneys general and state 
regulators.\32\
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    \31\ See Section 105(b)(4)(A) of the Act; see also PCAOB Rule 
5112(a), Commission Notification of Order of Formal Investigation. 
Documents and information prepared or received by or specifically 
for the Board in connection with an investigation are confidential 
and privileged as an evidentiary matter, but the Board may share 
them with the Commission and, under certain circumstances, with the 
Attorney General of the United States, certain federal regulators, 
state attorneys general, certain state regulators, and certain self-
regulatory organizations. See Section 105(b)(5)(B) of the Act.
    \32\ See Section 105(b)(4)(B) of the Act; see also PCAOB Rule 
5112(b), Board Referrals of Investigations; PCAOB Rule 5112(c), 
Commission-directed Referrals of Investigations.
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The Board's Cooperative Framework for International Oversight
    The Board has long observed that certain aspects of its inspection 
and investigation mandates raise special concerns for non-U.S. firms, 
including potential conflicts with non-U.S. law.\33\ Acknowledging 
these challenges early on, the Board affirmed its commitment ``to 
finding ways to accomplish the goals of the Act without subjecting non-
U.S. firms to conflicting requirements.'' \34\ The Board then worked 
with its international counterparts where necessary or appropriate, 
based on norms of international comity, to develop arrangements and 
working practices to enable the Board and other audit regulators to 
achieve their respective mandates in a manner responsive to the 
potential conflicts of law that non-U.S. firms might confront.\35\ The 
Board's cooperative approach to oversight of registered firms located 
outside the United States did not, however, entail any abandonment of 
the Board's inspection or investigation mandates or any relinquishment 
of the Board's statutory authority to obtain the documents and 
information it needs from non-U.S. firms in order to execute those 
mandates.\36\
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    \33\ See, e.g., Proposed Rules Relating to the Oversight of Non-
U.S. Public Accounting Firms, PCAOB Rel. No. 2003-024, at 3 (Dec. 
10, 2003).
    \34\ Inspection of Registered Public Accounting Firms, PCAOB 
Rel. No. 2003-019, at 5, A2-15-A2-16 (Oct. 7, 2003).
    \35\ See, e.g., Briefing Paper, Oversight of Non-U.S. Public 
Accounting Firms, PCAOB Rel. No. 2003-020, at 1-2 (Oct. 28, 2003) 
(``[T]he PCAOB seeks to become partners with its international 
counterparts in the oversight of the audit firms that operate in the 
global capital markets. . . . [A]n arrangement based on mutual 
cooperation with other high quality regulatory systems respects the 
cultural and legal differences of the regulatory regimes that exist 
around the world.''); PCAOB Rel. No. 2003-024, at 8 (``The Board 
also believes its [cooperative] arrangements may reduce potential 
conflicts of law . . . .'').
    \36\ PCAOB Rel. No. 2003-020, at 5 (``The Board believes that it 
is appropriate that a cooperative approach respect the laws of other 
jurisdictions, to the extent possible. At the same time, every 
jurisdiction must be able to protect the participants in, and the 
integrity of, its capital markets as it deems necessary and 
appropriate.''); accord Final Rules Relating to Oversight of Non-
U.S. Firms, PCAOB Rel. No. 2004-005, at 3, A2-17 (June 9, 2004).
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    When the Board adopted its cooperative framework for overseeing 
non-U.S. registered firms,\37\ it rejected calls to afford non-U.S. 
firms that elected to register with the Board a legal-conflict 
accommodation during inspections and investigations.\38\ In so doing, 
the Board reiterated that ``[p]reserving the Board's ability to access 
audit work papers and other documents or information maintained by 
registered public accounting firms, including non-U.S. registered 
public accounting firms, is critical to the Board carrying out its 
obligations under the Act.'' \39\ For that reason, the Board did not 
believe that it would be ``in the interests of U.S. investors or the 
public for the Board to adopt a rule of general application that would 
limit its ability to access such documents or information regardless of 
the circumstances or need for those documents or information.'' \40\
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    \37\ See generally PCAOB Rel. No. 2004-005.
    \38\ See id. at A2-15-A2-16.
    \39\ Id. at A2-16.
    \40\ Id. at A2-16-A2-17.
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    The Commission approved the Board's rules regarding oversight of 
non-U.S. firms, which embody the cooperative approach described 
above.\41\ The Commission observed that the PCAOB was discussing 
potential conflicts of law with foreign audit oversight bodies and 
encouraged the PCAOB to continue those discussions and to consider ways 
to work cooperatively with its international counterparts.\42\
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    \41\ See Order Approving Proposed Rules Relating to Oversight of 
Non-U.S. Registered Public Accounting Firms, SEC Exchange Act 
Release No. 34-50291, at 3 (Aug. 30, 2004).
    \42\ See id. at 3.
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    Those discussions have continued, and nearly all have been 
fruitful. The Board's oversight programs take into account the 
possibility that a non-U.S. firm's obligations under the Act or the 
Board's rules might conflict with non-U.S. law. The Board has 
established procedures that enable non-U.S. firms to assert legal 
conflicts during the registration and periodic reporting processes so 
that such firms are not prevented from completing a registration 
application or complying with periodic reporting requirements.\43\ The 
Board also seeks to coordinate and cooperate with its international 
counterparts when conducting inspections or investigations in other 
countries.\44\ Nevertheless, in all respects, the Board has made clear 
that its statutory authority to obtain the documents and information it 
needs to conduct inspections and investigations has not been 
relinquished, surrendered, forfeited, or otherwise vitiated.\45\
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    \43\ PCAOB Rule 2105, Conflicting Non-U.S. Laws, permits a non-
U.S. firm to withhold required information from its registration 
application based on an asserted conflict with non-U.S. law. That 
rule allows the Board to treat a registration application as 
complete if the firm, among other things, submits a copy of the 
purportedly conflicting non-U.S. law and an accompanying legal 
opinion. But Rule 2105 does not provide a vehicle for resolving 
conflicts of law during registration, nor does it apply ``to 
potential conflicts of law that may arise subsequent to 
registration.'' PCAOB Rel. No. 2004-005, at A2-16-A2-18; see also 
PCAOB Rule 2207, Assertions of Conflicts with Non-U.S. Laws 
(establishing a similar process for registered firms' annual and 
special reports to the Board).
    \44\ See, e.g., Rules on Periodic Reporting by Registered Public 
Accounting Firms, PCAOB Rel. No. 2008-004, at 32 (June 10, 2008).
    \45\ See, e.g., id. at 41 (``The Board has consistently 
maintained that, although it will seek to work cooperatively with 
and through non-U.S. regulators, and although it is willing to 
accommodate a non-U.S. firm's reluctance (rooted in an asserted 
conflict of law) to provide the required written consent to 
cooperate, each firm ultimately has an obligation to cooperate with 
the Board to the extent that the Board requires cooperation. The 
Board does not view this statutory obligation as limited or 
qualified by non-U.S. legal restrictions.'').
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Resolution of Obstacles to Inspections and Investigations in Non-U.S. 
Jurisdictions
    The practices and approaches the Board has successfully developed 
with foreign regulators to resolve conflicts and to complete 
inspections and investigations under the Act can differ from 
jurisdiction to jurisdiction, but they all implement three core 
principles:

[[Page 53703]]

    (1) The Board must be able to conduct inspections and 
investigations consistent with its mandate; \46\
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    \46\ See, e.g., Section 104(a)(1) of the Act (requiring a 
``continuing program of inspections''); Section 104(b)(1) of the Act 
(establishing inspection frequency requirements); Section 104(c) of 
the Act (requiring identification of non-compliant acts, practices, 
or omissions to act, and providing for reporting of such conduct to 
the Commission and appropriate state regulatory authorities, when 
appropriate); Section 105(b)(1) of the Act (authorizing Board 
investigations); Section 105(b)(3) of the Act (authorizing the 
imposition of sanctions for noncooperation with an investigation); 
Section 105(b)(4) of the Act (requiring coordination with the 
Commission's Division of Enforcement and authorizing referrals of 
investigations in certain circumstances); Section 105(b)(5)(B)(i) of 
the Act (authorizing the Board to share with the Commission 
documents received in connection with an inspection or 
investigation).
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    (2) The Board must be able to select the audit work and potential 
violations to be examined; \47\ and
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    \47\ See, e.g., Section 104(d)(1) of the Act (directing the 
Board to inspect and review audit and review engagements ``as 
selected by the Board''); Section 104(d)(3) of the Act (authorizing 
the Board to perform other testing of audit, supervisory, and 
quality control procedures as are necessary or appropriate in light 
of the purpose of the inspection and the responsibilities of the 
Board); Section 105(b)(1) of the Act (authorizing the Board to 
conduct an investigation of ``any'' act, practice, or omission to 
act by a registered firm or an associated person thereof that may 
violate ``any'' provision of the Act, the rules of the Board, the 
provisions of the securities laws relating to the preparation and 
issuance of audit reports and the obligations and liabilities of 
accountants with respect thereto, including the rules of the 
Commission under the Act, or professional standards).
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    (3) The Board must have access to firm personnel, audit work 
papers, and other information and documents deemed relevant by Board 
staff.\48\
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    \48\ See, e.g., Section 104(d)(1) of the Act (directing the 
Board to inspect and review audit and review engagements); Section 
104(d)(2) of the Act (directing the Board to evaluate the 
sufficiency of a registered firm's quality control system, including 
the manner of the documentation and communication of that system); 
Section 105(b)(2)(A)-(B) of the Act (authorizing the Board to 
require the testimony of, and the production of audit work papers 
and any other documents or information from, registered firms and 
their associated persons, wherever domiciled, and to inspect the 
books and records of such firm or associated person to verify the 
accuracy of any documents or information supplied).
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    The Board has been able to accommodate the legal requirements of 
most non-U.S. jurisdictions without compromising on these three core 
principles, which the Board considers to be fundamental to its ability 
to inspect and investigate non-U.S. firms completely.
    Building collaborative working relationships with international 
counterparts based on these principles has taken considerable time and 
substantial effort, but the Board believes that ``it is in the 
interests of the public and investors for the Board to develop 
efficient and effective cooperative arrangements with its non-U.S. 
counterparts.'' \49\ The Board now has extensive experience with 
cooperative arrangements that successfully resolve conflicts and allow 
the PCAOB and its international counterparts to satisfy their 
respective oversight mandates.
---------------------------------------------------------------------------

    \49\ PCAOB Rel. No. 2009-003, at 4-5.
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Board Inspections of Non-U.S. Firms
    Inspections of non-U.S. firms began in 2005,\50\ and the Board 
quickly identified obstacles that required negotiation with its 
international counterparts. When a registered firm issuing audit 
reports for an issuer is located in a non-U.S. jurisdiction that has an 
auditor oversight authority of its own, the Board seeks to engage with 
that local regulator. The PCAOB conducts many inspections of non-U.S. 
firms jointly with local authorities, using approaches that take into 
consideration the laws and practices of the local jurisdiction. The 
Board also developed a specific regulatory framework for assessing the 
degree, if any, to which the Board may rely on the inspection work of 
the local regulator in an effort to reduce redundancy.\51\ Even where 
the Board conducts its own inspection rather than a joint inspection 
with a local auditor oversight authority, the Board may communicate 
with its international counterpart regarding the Board's inspections in 
the jurisdiction.\52\
---------------------------------------------------------------------------

    \50\ See Rule Amendments Concerning the Timing of Certain 
Inspections of Non-U.S. Firms, and Other Issues Relating to 
Inspections of Non-U.S. Firms, PCAOB Rel. No. 2008-007, at 4 (Dec. 
4, 2008).
    \51\ See PCAOB Rel. No. 2009-003, at 5-6. Non-U.S. firms may 
formally request that the Board rely on a non-U.S. inspection to the 
extent deemed appropriate by the Board, and the Board will examine 
certain factors to determine the degree, if any, to which the Board 
may rely on the non-U.S. inspection. See PCAOB Rule 4011, Statement 
by Foreign Registered Public Accounting Firms; PCAOB Rule 4012, 
Inspections of Foreign Registered Public Accounting Firms; PCAOB 
Rel. No. 2009-003, at 5. In contrast to an exemption, reliance on a 
non-U.S. inspection pursuant to Rule 4012 is a cooperative approach 
that can be used when efficient and appropriate.
    \52\ See PCAOB Rel. No. 2009-003, at 5.
---------------------------------------------------------------------------

    By December 2008, the Board had inspected non-U.S. firms in 24 
jurisdictions.\53\ But the Board also observed that home-country legal 
obstacles and sovereignty concerns were impeding the Board's ability to 
conduct inspections of some non-U.S. firms.\54\ Given these obstacles, 
the Board, in 2009, adjusted the schedule for its first inspections of 
non-U.S. firms in certain jurisdictions so that the Board could 
continue its efforts to reach cooperative arrangements with those 
firms' home-country regulators.\55\
---------------------------------------------------------------------------

    \53\ See PCAOB Rel. No. 2008-007, at 4 & n.9 (inspections had 
been conducted in Argentina, Australia, Bermuda, Brazil, Canada, 
Chile, Colombia, Greece, Hong Kong, India, Indonesia, Ireland, 
Israel, Japan, Kazakhstan, Mexico, New Zealand, Panama, Peru, 
Singapore, South Africa, South Korea, Taiwan, and the United 
Kingdom).
    \54\ PCAOB Rel. No. 2009-003, at 5.
    \55\ See id. at 9.
---------------------------------------------------------------------------

    In so doing, however, the Board expressly rejected the suggestion 
that it should exempt from inspection non-U.S. firms ``that cannot 
cooperate with PCAOB inspections due to legal conflicts or sovereignty-
based opposition from their local governments,'' finding that exempting 
such firms from inspections is not in the interests of investors or the 
public.\56\ Instead, the Board reaffirmed the ultimate obligation of 
all registered firms, including non-U.S. firms, to be subject to 
inspection and to comply with the Board's inspection-related 
requests.\57\
---------------------------------------------------------------------------

    \56\ See id. at 8-9.
    \57\ See id. at 13-14 (``[F]irms must register with the Board in 
order to engage in certain professional activity directly related 
to, and affecting, U.S. financial markets, and all registered firms 
are subject to the Act and the rules of the Board irrespective of 
their location. A registered firm is subject to various requirements 
and conditions, including PCAOB Rule 4006's requirement to cooperate 
in an inspection. In addition, as reflected in Section 102(b)(3) of 
the Act, a firm's compliance with Board requests for information is 
a condition of the continuing effectiveness of the firm's 
registration with the Board.''). The Board also reiterated that it 
``does not view non-U.S. legal restrictions or the sovereignty 
concerns of local authorities as a sufficient defense in a Board 
disciplinary proceeding . . . for failing or refusing to provide 
information requested in an inspection.'' Id. at 14; accord PCAOB 
Rel. No. 2008-007, at 16 n.35.
---------------------------------------------------------------------------

    The Commission, in approving the Board's extension of the deadline 
for the first inspections of certain non-U.S. firms, recognized that 
``the adjustment would provide additional time [for the Board] to 
continue discussions on outstanding matters and work towards 
cooperation and coordination with authorities in all relevant 
jurisdictions.'' \58\ And in connection with its approval of other 
adjustments to the inspection schedule of non-U.S. firms, the 
Commission stated that ``the PCAOB should continue to work toward 
cooperative arrangements with the appropriate local auditor oversight 
authorities where it is reasonably likely that appropriate cooperative 
arrangements can be obtained.'' \59\
---------------------------------------------------------------------------

    \58\ Order Approving Proposed Amendment to Board Rules Relating 
to Inspections, SEC Exchange Act Release No. 34-59991, at 3 (May 28, 
2009).
    \59\ Id. at 5.
---------------------------------------------------------------------------

    By the end of 2009, the Board had conducted inspections of non-U.S. 
firms in an additional nine jurisdictions, bringing the cumulative 
total to 33 jurisdictions.\60\ The Board, however,

[[Page 53704]]

was still prevented from inspecting registered firms in mainland China, 
Hong Kong (to the extent an audit encompassed a company's operations in 
mainland China), Switzerland, and the European countries required to 
follow the European Union's Directive on Statutory Auditors.\61\
---------------------------------------------------------------------------

    \60\ See Jurisdictions in Which the PCAOB Has Conducted 
Inspections (as of Dec. 31, 2009) (Feb. 3, 2010), available at 
https://pcaob-assets.azureedge.net/pcaob-dev/docs/default-source/inspections/documents/12-31_jurisdictions.pdf?sfvrsn=2c09bd73_0 
(adding Belize, Bolivia, Cayman Islands, Norway, Papua New Guinea, 
Philippines, Russia, Ukraine, and United Arab Emirates).
    \61\ See PCAOB Publishes Updated Staff Guidance Related to 
Registration Process for Applicants from Certain Non-U.S. 
Jurisdictions (June 1, 2010), available at https://org/events/news-
releases/news-release-detail/pcaob-publishes-updated-staff-guidance-
related-to-registration-process-for-applicants-from-certain-non-u-s-
jurisdictions_289.
---------------------------------------------------------------------------

    The Board responded to these obstacles in several ways \62\ and, 
since 2010, the Board has inspected non-U.S. firms in an additional 20 
jurisdictions, bringing the total number of non-U.S. jurisdictions in 
which the PCAOB has conducted inspections to 53.\63\ Where needed, the 
Board enters into formal bilateral cooperative agreements with non-U.S. 
regulators, and has done so with authorities in 25 jurisdictions.\64\ 
The Board continues to publish its Denied Access List, which identifies 
the jurisdictions where the PCAOB cannot conduct inspections because 
foreign authorities have denied access, the auditors from those 
jurisdictions that issued audit reports filed with the Commission, and 
those auditors' non-U.S. public company clients.\65\ The Board also 
still adheres to the registration approach it adopted in 2010 and 
maintains a public list of the jurisdictions whose applicants are 
subject to that approach.\66\
---------------------------------------------------------------------------

    \62\ In 2009, the Board began publishing a list of registered 
firms whose first inspections were overdue, which identified the 
jurisdiction in which each firm was located. See PCAOB Rel. No. 
2009-003, at 10-11. In 2010, the Board expanded the publication to 
include a list of non-U.S. public companies with securities traded 
in U.S. markets that had retained a registered firm the Board could 
not inspect because of asserted restrictions based on non-U.S. law 
or objections on grounds of national sovereignty (the ``Denied 
Access List''). See PCAOB Publishes List of Issuer Audit Clients of 
Non-U.S. Registered Firms in Jurisdictions where the PCAOB is Denied 
Access To Conduct Inspections (May 18, 2010), available at https://pcaobus.org/news-events/news-releases/news-release-detail/pcaob-publishes-list-of-issuer-audit-clients-of-non-u-s-registered-firms-in-jurisdictions-where-the-pcaob-is-denied-access-to-conduct-inspections_284 (``The auditors of the issuers appearing on this 
list are located in [mainland] China, Hong Kong, Switzerland, and 18 
European Union countries. The PCAOB continues to work to eliminate 
obstacles to inspections in these jurisdictions.'').
    Also, in October 2010, the Board modified its approach to 
registration applications from firms in jurisdictions where there 
were unresolved obstacles to inspections, stating that ``its 
consideration of new applications from firms in those jurisdictions 
will no longer be premised on an expectation that those obstacles 
will be resolved without undue delay to any necessary PCAOB 
inspection of the firm.'' Consideration of Registration Applications 
From Public Accounting Firms in Non-U.S. Jurisdictions Where There 
Are Unresolved Obstacles to PCAOB Inspections, PCAOB Rel. No. 2010-
007, at 2-3 (Oct. 7, 2010). A list of those jurisdictions is 
maintained on the PCAOB's website. See Frequently Asked Questions 
Regarding Issues Relating to Non-U.S. Accounting Firms (Apr. 20, 
2021), available at https://pcaobus.org/oversight/registration/non_us_registration_faq (FAQ 6).
    \63\ See Non-U.S. Jurisdictions Where the PCAOB has Conducted 
Oversight, available at https://pcaobus.org/oversight/international/international/pcaob-inspections-of-registered-non-u-s--firms (adding 
Austria, Bahamas, Denmark, Finland, France, Germany, Hungary, Italy, 
Jamaica, Luxembourg, Malaysia, Netherlands, Nicaragua, Nigeria, 
Pakistan, Spain, Sweden, Switzerland, Thailand, and Turkey).
    \64\ See PCAOB Cooperative Arrangements with Non-U.S. 
Regulators, available at https://pcaobus.org//international/regulatorycooperation. Although a formal bilateral agreement is not 
necessarily a prerequisite to a PCAOB inspection in a non-U.S. 
jurisdiction, the PCAOB often enters into such agreements with 
foreign audit regulators to minimize administrative burdens and 
potential legal or other conflicts that non-U.S. firms might face in 
their home countries.
    \65\ See Audit Reports Issued by PCAOB-Registered Firms in 
Jurisdictions where Authorities Deny Access to Conduct Inspections, 
available at https://pcaobus.org/oversight/international/denied-access-to-inspections (identifying jurisdictions where the Board has 
been denied access to conduct inspections).
    \66\ See Frequently Asked Questions Regarding Issues Relating to 
Non-U.S. Accounting Firms (Apr. 20, 2021), available at https://pcaobus.org/oversight/registration/non_us_registration_faq (FAQ 6, 
identifying jurisdictions where obstacles to inspection exist). This 
list of jurisdictions is broader than the Denied Access List, 
because this list includes certain European jurisdictions where the 
Board presently does not need to conduct inspections because no 
registered firms in the jurisdiction are issuing audit reports, but 
where an agreement regarding inspections would need to be reached 
before any future inspections could take place.
---------------------------------------------------------------------------

    All told, more than 840 non-U.S. firms from more than 80 
jurisdictions are registered with the Board. Over 200 of those firms, 
from more than 40 jurisdictions, are presently subject to PCAOB 
inspection on a triennial basis because they have chosen to audit 
issuers.\67\ As of the date of this release, as reflected on the 
Board's website,\68\ the Board can conduct inspections everywhere it 
needs to do so except in mainland China and Hong Kong.
---------------------------------------------------------------------------

    \67\ Currently, there are no non-U.S. firms that the PCAOB is 
required by the Act to inspect on an annual basis.
    \68\ See International, available at https://pcaobus.org/oversight/international (providing a map showing where the Board 
currently is able to conduct oversight of registered firms and where 
the Board currently is denied the necessary access to conduct 
oversight activities).
---------------------------------------------------------------------------

Board Investigations of Non-U.S. Firms
    The Board has conducted numerous investigations in which it 
appeared that an act, practice, or omission to act by a non-U.S. firm 
or its associated persons might have violated an applicable law, rule, 
or standard. In the course of those investigations, the Board has used 
a variety of tools, provided for in the Act and the Board's rules, to 
access relevant documents and information. Using those tools, the Board 
has requested and obtained audit work papers and other documents and 
information from non-U.S. firms and associated persons, and has 
conducted interviews and testimony of non-U.S. firm personnel.
    In many of those instances, the Board coordinated its investigation 
with a non-U.S. regulator with which it had entered a bilateral 
cooperative arrangement. Those cooperative arrangements have allowed 
the Board and its international counterpart to communicate and share 
information, facilitating the Board's access to the documents and 
information it needed to conduct the investigation. In some but not all 
circumstances, in parallel with the Board's investigation, a non-U.S. 
regulator may conduct its own investigation of the same firm or 
associated persons for possible violations under the regulator's laws 
and standards.
    Many of the Board's investigations of non-U.S. firms or their 
associated persons remain confidential, because Board investigations 
are non-public and cannot be disclosed unless they have resulted in the 
imposition of disciplinary sanctions.\69\ The Board does, however, 
disclose its settled and adjudicated disciplinary orders imposing 
sanctions.\70\ To date, the Board has sanctioned more than 50 non-U.S. 
registered firms and more than 60 associated persons of such firms, 
from 24 non-U.S. jurisdictions.\71\ In addition to the investigations 
that resulted in the imposition of sanctions, the Board also has 
conducted investigations that did not result in sanctions in numerous 
other non-U.S. jurisdictions. Yet despite these results, the Board has 
been unable to complete some investigations of non-U.S. firms or their 
personnel because they refused to cooperate with an investigation based 
on a position taken

[[Page 53705]]

by non-U.S. authorities in their jurisdiction.\72\
---------------------------------------------------------------------------

    \69\ See Section 105(b)(5)(A) of the Act.
    \70\ When the Board imposes sanctions, the Board's disciplinary 
action is stayed if the respondent applies for Commission review of 
the Board's order or if the Commission initiates such review on its 
own. In either situation, the Board's sanctions remain stayed (and 
non-public) unless and until the Commission lifts the stay. See 
Section 105(e)(1) of the Act. After the stay is lifted, the Board's 
order may be made public. See Section 105(d)(1)(C) of the Act.
    \71\ See Enforcement Actions, available at https://pcaobus.org/oversight/enforcement/enforcement-actions.
    \72\ See, e.g., Crowe Horwath (HK) CPA Limited, PCAOB Rel. No. 
105-2017-031 (July 25, 2017) (noncooperation with a Board 
investigation based on positions taken by Chinese authorities); Kim 
Wilfred Ti, PCAOB Rel. No. 105-2016-004 (Jan. 12, 2016) (same); 
Derek Wan Tak Shing, PCAOB Rel. No. 105-2016-003 (Jan. 12, 2016) 
(same); Edith Lam Kar Bo, PCAOB Rel. No. 105-2016-002 (Jan. 12, 
2016) (same); PKF [Hong Kong], PCAOB Rel. No. 105-2016-001 (Jan. 12, 
2016) (same).
---------------------------------------------------------------------------

The Holding Foreign Companies Accountable Act
    Against this backdrop, Congress enacted the HFCAA. The HFCAA, which 
amends Section 104 of the Act, calls for the Board to determine whether 
it is unable to inspect or investigate completely registered firms 
located in a foreign jurisdiction because of a position taken by an 
authority in that jurisdiction.\73\ The HFCAA, among other things, also 
mandates that after the Board makes such a determination, the 
Commission shall require covered issuers that retain firms subject to 
the Board's determination to make certain disclosures in their annual 
reports and, eventually, if certain conditions persist, shall prohibit 
trading in those issuers' securities.\74\
---------------------------------------------------------------------------

    \73\ See HFCAA Sec.  2(i)(2)(A), 15 U.S.C. 7214(i)(2)(A) 
(requiring that the Commission identify certain issuers that 
``retain[ ] a registered public accounting firm that has a branch or 
office that . . . is located in a foreign jurisdiction . . . and . . 
. the Board is unable to inspect or investigate completely because 
of a position taken by an authority in [that] foreign jurisdiction . 
. . , as determined by the Board'').
    \74\ See HFCAA Sec. Sec.  2(i)(2)(B), 2(i)(3), 3(b), 15 U.S.C. 
7214(i)(2)(B), 7214(i)(3), 7214a(b).
---------------------------------------------------------------------------

    The Board's determinations under the HFCAA supplement, rather than 
supplant, the Board's other authorities under the Act. A registered 
firm's cooperation in and compliance with Board requests during 
inspections and investigations continues to be a condition to the 
continuing effectiveness of its registration with the Board. Failure to 
cooperate with a Board inspection or investigation still can result in 
the imposition of disciplinary sanctions, including civil money 
penalties and revocation of the firm's registration. Therefore, firms 
must consider their obligations to comply with PCAOB inspection and 
investigation demands when they choose to become and remain registered 
with the Board and when they accept or continue client engagements.
Discussion of the Proposed Rule
    The HFCAA does not specify the procedure the Board should follow 
when making determinations. Nor does the HFCAA specify the content of 
the Board's determinations; the manner in which any such determination 
should be shared with the Commission; how, and in what format, any such 
determination should be made publicly available; the effective date or 
duration of any such determination; or the manner in which any such 
determination can be reaffirmed, modified, or vacated. The proposed 
rule establishes those facets of the Board's determination process.
    Although the HFCAA does not expressly require the Board to adopt a 
rule governing the determinations it makes under the statute, the Board 
believes that a rule will inform investors, registered firms, issuers, 
audit committees, foreign authorities, and the public at large as to 
how the Board will perform its functions under the statute. 
Furthermore, a Board rule will promote consistency in the Board's 
processes regarding determinations under the HFCAA.\75\ Commenters 
generally agreed that a rule governing the Board's determination 
process would promote transparency and consistency and reduce 
regulatory uncertainty.
---------------------------------------------------------------------------

    \75\ The Act states that ``[t]he rules of the Board shall, 
subject to the approval of the Commission[,] . . . provide for the 
operation and administration of the Board, the exercise of its 
authority, and the performance of its responsibilities under this 
Act.'' Section 101(g)(1) of the Act.
---------------------------------------------------------------------------

Two Types of Board Determinations Under the HFCAA
    The HFCAA requires that the Board determine whether it is unable to 
inspect or investigate completely registered public accounting firms 
that have a branch or office that is located in a foreign jurisdiction 
because of a position taken by one or more authorities in that 
jurisdiction. The proposed rule provides that the Board may make two 
types of determinations: Determinations as to a particular foreign 
jurisdiction and determinations as to a particular registered firm. 
Those two types of determinations are addressed in subparagraphs (a)(1) 
and (a)(2) of proposed Rule 6100.
Determinations as to Registered Firms Headquartered in a Particular 
Foreign Jurisdiction
    The Board believes that firms headquartered in a foreign 
jurisdiction necessarily have a branch or office that is located in 
that jurisdiction. Taking that into account, subparagraph (a)(1) of the 
proposed rule provides that the Board may determine that it is unable 
to inspect or investigate completely registered firms \76\ 
headquartered in a foreign jurisdiction because of a position taken by 
one or more authorities in that jurisdiction. In other words, a 
jurisdiction-wide determination under subparagraph (a)(1) would apply 
to all firms headquartered in that jurisdiction.
---------------------------------------------------------------------------

    \76\ The HFCAA refers to a firm's ``branch or office'' that the 
Board is unable to inspect or investigate completely. HFCAA Sec.  
2(i)(2)(A)(i), 15 U.S.C. 7214(i)(2)(A)(i). The Board does not 
inspect or investigate branches or offices. Rather, the Board 
inspects registered firms and investigates potential violations by 
registered firms or their associated persons. Accordingly, the 
proposed rule refers to the Board's inability to inspect or 
investigate registered firms.
---------------------------------------------------------------------------

    The Board adopted subparagraph (a)(1) as proposed. Commenters 
generally supported the Board's proposed approach to jurisdiction-wide 
determinations. Several commenters noted that jurisdiction-wide 
determinations would be consistent with the HFCAA or otherwise 
appropriate, and several other commenters stated that having such 
determinations apply to firms that are headquartered in the 
jurisdiction would likewise be appropriate. No commenter asserted that 
jurisdiction-wide determinations would be inconsistent with the HFCAA 
or otherwise inappropriate.
    The Board believes that a jurisdiction-wide approach to its 
determinations under the HFCAA is consistent with the structure of the 
statute. The statute requires the Board's determinations to be based on 
``a position taken by an authority in the foreign jurisdiction.'' It 
follows that if a foreign authority articulates or maintains a position 
that applies generally to PCAOB inspections or investigations in a 
foreign jurisdiction, that position could provide the basis for a 
jurisdiction-wide determination. Hence, the statute, in the Board's 
view, can reasonably be interpreted to allow the Board to make 
jurisdiction-wide determinations.\77\
---------------------------------------------------------------------------

    \77\ See, e.g., 166 Cong. Rec. H6033 (daily ed. Dec. 2, 2020) 
(statement of Rep. Gonzalez) (``[T]he act should be read to apply to 
companies where the auditor that signs the audit report is located 
in a jurisdiction that does not permit PCAOB inspection access.'').
---------------------------------------------------------------------------

    Having a jurisdiction-wide approach at the Board's disposal is 
important for consistency and efficiency. When the obstacles to 
completing inspections and investigations are not specific to 
individual registered firms, but instead reflect threshold or general 
positions taken by a foreign authority, the Board believes that it 
should be able to address those obstacles on a jurisdiction-wide basis 
in a consistent manner and in a single determination. Under those 
circumstances, separate determinations as to each registered firm in 
the jurisdiction should not be required.
    The proposed rule provides that jurisdiction-wide determinations 
would be limited to registered firms that are

[[Page 53706]]

``headquartered'' in the jurisdiction. The Board believes that a 
position taken by a foreign authority will impact registered firms 
headquartered in the jurisdiction, but its impact on firms that are 
headquartered elsewhere can turn on multiple factors, including the 
extent of a firm's presence in the jurisdiction and the nature and 
extent of the audit work it performs in that jurisdiction. Limiting 
jurisdiction-wide determinations to firms that are headquartered in the 
jurisdiction is intended to ensure that these determinations are 
appropriately tailored and do not encompass firms that have a physical 
presence of any kind, or personnel of any number, in the jurisdiction. 
Consistent with the scope of the HFCAA, however, the proposed rule 
provides that the Board may make individualized determinations as to 
firms that have an ``office'' in a noncooperative jurisdiction but are 
headquartered elsewhere, as discussed below.
    A firm is ``headquartered,'' as that term is used in the proposed 
rule, at its principal place of business (i.e., where the firm's 
management directs, controls, and coordinates the firm's 
activities).\78\ The Board would presume that a firm is headquartered 
at the physical address reported by the firm as its headquarters to the 
Board in the firm's required filings.\79\ Absent an indication that the 
headquarters address reported by a firm may not be its principal place 
of business, the Board would use that address to determine where the 
firm is ``headquartered'' for purposes of the proposed rule. If 
questions arise as to whether a firm's reported headquarters address is 
the firm's principal place of business, however, the Board may consider 
other relevant and reliable information regarding the firm and may 
request additional information from the firm pursuant to the Board's 
rules when determining where a firm is headquartered.\80\
---------------------------------------------------------------------------

    \78\ See, e.g., Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010) 
(defining ``principal place of business'' in the context of federal 
diversity jurisdiction, and further explaining that ``in practice it 
should normally be the place where the corporation maintains its 
headquarters--provided that the headquarters is the actual center of 
direction, control, and coordination, i.e., the `nerve center,' and 
not simply an office where the corporation holds its board 
meetings'').
    \79\ When registering with the Board, an applicant must provide 
its ``HEADQUARTERS PHYSICAL ADDRESS'' in Item 1.2.1 of its 
application for registration on Form 1. Each year thereafter, in 
Item 1.2.a of its annual report on Form 2, a firm must provide the 
``Physical address of the Firm's headquarters office.''
    \80\ See PCAOB Rule 4000(b) (``In furtherance of the Board's 
inspection process, the Board may at any time request that a 
registered public accounting firm provide to the Board additional 
information or documents relating to information provided by the 
firm in any report filed pursuant to Section 2 of these Rules, or 
relating to information that has otherwise come to the Board's 
attention.''). This approach aligns with the Board's decade-long 
practice when assessing registration applications from firms located 
in non-U.S. jurisdictions where there are obstacles to PCAOB 
inspections. This approach has been applied to applicants that are 
headquartered in such jurisdictions, and the Board has sought 
additional information from applicants when necessary to assess 
where they are headquartered.
---------------------------------------------------------------------------

    Several commenters stated that it was appropriate for the Board to 
look at a firm's required filings with the Board in the first instance 
for information as to where the firm is headquartered. One commenter 
suggested that the Board look beyond such filings and also consider a 
firm's filings with its home-country regulator as well as other facts 
and circumstances regarding the firm. As noted in the preceding 
paragraph, the Board retains the ability to request and consider 
additional information--including the information identified by the 
commenter--if any questions arise regarding the location of a firm's 
headquarters. Another commenter, contemplating that the Board might 
look to filings of Form AP for information as to where a firm is 
headquartered, cautioned that such forms may not be timely filed.\81\ 
The Board intends to rely on annual reports on Form 2 rather than Form 
APs for such information, though the Board is not precluded from 
considering information on Form APs or any other relevant and reliable 
information.\82\
---------------------------------------------------------------------------

    \81\ Item 3.1.7 of Form AP identifies the office (not the 
headquarters) of the firm that issued the audit report for the 
referenced audit engagement, but Item 4.1 of Form AP identifies the 
headquarters' office location of the other accounting firms that 
contributed 5% or more of the total audit hours.
    \82\ In any event, PCAOB Rule 3211, Auditor Reporting of Certain 
Audit Participants, already requires timely filing of accurate Form 
APs, and the failure to comply with that rule can provide the basis 
for inspection findings or disciplinary sanctions.
---------------------------------------------------------------------------

    In some instances, a member firm of an international firm network 
might be headquartered in a jurisdiction that becomes subject to a 
jurisdiction-wide determination of the Board. In such a circumstance, 
if that member firm is a separate legal entity from the other member 
firms in the network and signs audit reports in its own name, the Board 
would not treat other member firms in the network as being ``located'' 
or having an ``office'' in that jurisdiction merely because they are 
part of the same network as a member firm subject to the jurisdiction-
wide determination.\83\ One commenter addressed this topic and agreed 
with this approach.
---------------------------------------------------------------------------

    \83\ See SEC Exchange Act Release No. 91364, at 4 n.8.
---------------------------------------------------------------------------

    Based on its experience with inspections and investigations in 
foreign jurisdictions, the Board anticipates that most determinations 
made under proposed Rule 6100 would be jurisdiction-wide determinations 
under subparagraph (a)(1). Historically, the positions taken by foreign 
authorities have impaired the Board's ability to conduct inspections or 
investigations in the jurisdiction generally.
    Some of the positions taken by foreign authorities have been based 
upon ``gatekeeper'' laws, which provide that a registered firm can 
transfer its audit work papers to the Board only via a local non-U.S. 
regulator. (By contrast, no audit oversight law in the U.S. requires 
foreign auditor oversight authorities to involve the PCAOB when seeking 
audit work papers from a U.S. firm.) As noted above, the Board has 
considerable experience resolving conflicts that arise from gatekeeper 
laws using bilateral arrangements, or statements of protocol, whereby 
the non-U.S. regulator facilitates the PCAOB's access to audit work 
papers and associated information that registered firms are obligated 
to provide to the Board upon request. The Board's ability to conduct 
inspections or investigations could become impaired in any of these 
jurisdictions, however, if such an arrangement were terminated; if non-
performance under an arrangement were significant; or if, in the case 
of countries within the European Economic Area, an arrangement were 
rendered ineffective because the European Commission revoked or failed 
to renew its ``adequacy decision'' regarding the PCAOB.\84\ The 
resulting impairment would have jurisdiction-wide impact, and thus 
could give rise to a jurisdiction-wide determination under subparagraph 
(a)(1) of the proposed rule. The Board believes that a jurisdiction-
wide determination would be an efficient, appropriate response to such 
an impairment.
---------------------------------------------------------------------------

    \84\ Article 47 of the Directive 2014/56/EU of the European 
Parliament and of the Council of 16 April 2014 amending Directive 
2006/43/EC on statutory audits of annual accounts and consolidated 
accounts requires that the European Commission issue an adequacy 
decision regarding a third country audit regulator (such as the 
PCAOB) and that regulator's ability to safeguard audit work papers 
and related confidential information before a European Union member 
state audit regulator can execute a working arrangement allowing 
firms to provide access to such information. See Directive 2014/56/
EU, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0056. The European Commission's July 2016 
adequacy decision with respect to the PCAOB is set to expire in July 
2022.

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[[Page 53707]]

    Apart from gatekeeper laws, foreign authorities' positions also may 
be based on other substantive laws (e.g., personal data protection 
laws, state secrecy laws, banking secrecy laws, or commercial secrecy 
laws) that impair the Board's ability to conduct inspections or 
investigations by obstructing the Board's access to firm personnel, 
audit work papers, or other documents or information relevant to an 
inspection or investigation. The Board also has considerable experience 
working collaboratively with non-U.S. regulators to employ working 
practices that enable compliance with such non-U.S. laws without 
impairing the Board's ability to complete inspections or 
investigations. The proposed rule contemplates circumstances in which a 
cooperative resolution to those legal conflicts might not be achieved.
    In those circumstances, the Board believes that investors and the 
public interest would be best served by making a jurisdiction-wide 
determination under the HFCAA, even if the foreign jurisdiction's law 
(or interpretation or application of that law) affects the Board's 
ability to inspect or investigate only certain types of audit 
engagements. For instance, a foreign jurisdiction might deny to the 
PCAOB access to critical parts of the audit work papers for entities 
operating in a particular business sector (e.g., financial services) or 
with particular business models (e.g., state-owned enterprises). In 
such a case, even if only a few registered firms in that jurisdiction 
presently are auditing issuers in that sector or with that business 
model, the Board would assess whether its access would be equally 
impaired should any registered firm in the jurisdiction perform the 
restricted engagements. If the foreign authority's position applies 
generally to firms within the jurisdiction, then it impairs the Board's 
ability to conduct inspections or investigations completely on a 
jurisdiction-wide basis, regardless of the differences among registered 
firms' client portfolios at the time of the Board's determination. No 
commenter challenged this reasoning, nor did any commenter suggest that 
investors or the public interest would be better served if the Board 
were to make determinations as to particular firms, rather than 
jurisdiction-wide determinations, in such circumstances.
    In the situation described above, the Board does not believe that 
firm-by-firm determinations would be appropriate. While the Board could 
make a determination as to particular firms under subparagraph (a)(2) 
of the proposed rule based, for instance, on the composition of each 
firm's client portfolio at a moment in time, the Board believes that 
such an approach may not effectively accomplish the HFCAA's objectives. 
For instance, it might incentivize an issuer whose audit engagement 
cannot be inspected or investigated by the Board (a financial 
institution or state-owned enterprise in the example) to switch audit 
firms frequently. Specifically, if the issuer's audit firm were made 
subject to a Board determination under the HFCAA, the issuer could 
switch to another audit firm in the jurisdiction that had not 
previously handled a restricted engagement and, when the Board 
subsequently issued a determination under the HFCAA as to the issuer's 
new audit firm, the issuer could switch yet again. Such purposeful 
migration by issuers could trigger a perpetual cycle of Board 
determinations as to particular audit firms, while the issuers 
potentially evade some or all of the intended consequences of the 
HFCAA. A jurisdiction-wide determination, by contrast, would eliminate 
these concerns. No commenter disagreed with this analysis or the 
Board's rationale.
    The jurisdiction-wide determinations contemplated by subparagraph 
(a)(1) of the proposed rule also comport with the historical practice 
of identifying publicly the jurisdictions where there are unresolved 
obstacles to Board inspections or investigations. Since 2010, 
information of this kind has been posted on the PCAOB's website, for 
two purposes: To notify investors and potential investors of the public 
companies whose audit reports were issued by firms from those 
jurisdictions, and to notify firms considering potential registration 
with the Board of the consequences of obstacles to inspections in their 
jurisdictions.\85\
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    \85\ See Audit Reports Issued by PCAOB-Registered Firms in 
Jurisdictions where Authorities Deny Access to Conduct Inspections, 
available at https://pcaobus.org/oversight/international/denied-access-to-inspections; Frequently Asked Questions Regarding Issues 
Relating to Non-U.S. Accounting Firms (Apr. 20, 2021), available at 
https://pcaobus.org/oversight/registration/non_us_registration_faq 
(FAQ 6); see also International, available at https://pcaobus.org/oversight/international/ (providing map showing where the Board 
currently can and cannot conduct oversight activities).
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    Jurisdiction-wide determinations would rest, as the HFCAA directs, 
on whether the Board is able ``to inspect or investigate completely'' 
firms in the jurisdiction. The HFCAA, however, does not define what it 
means ``to inspect or investigate completely.'' The Board does not view 
that phrase as limited to instances where the Board started, but was 
unable to finish, an inspection or investigation of a registered firm, 
because foreign authorities' positions also can make it impossible or 
infeasible, as a practical matter, for the Board to attempt to commence 
such inspections or investigations in the first place. In other words, 
the Board may make a determination under the HFCAA under a range of 
circumstances, including when it is not able to commence an inspection 
or investigation or when, based on the Board's knowledge and 
experience, it has concluded that commencing an inspection or 
investigation would be futile as a result of the position taken by a 
foreign authority.
    With that in mind, the proposed rule ties the Board's ability to 
``inspect or investigate completely'' to the three core principles that 
guide the Board's framework for international cooperation. 
Specifically, the Board will consider whether it (1) can select the 
audits and audit areas it will review during inspections and the 
potential violations it will investigate; (2) has timely access to firm 
personnel, audit work papers, and other documents and information 
relevant to its inspections and investigations, and the ability to 
retain and use such documents and information; and (3) can otherwise 
conduct its inspections and investigations in a manner consistent with 
the Act and the Board's rules. For a further discussion of how these 
three principles would inform the Board's assessment of whether it can 
``inspect or investigate completely,'' see below.
    The Board's jurisdiction-wide determinations under the proposed 
rule would be based on ``a position taken by one or more authorities'' 
in the foreign jurisdiction. While the proposed rule refers to a 
singular ``position,'' that term encompasses all of the various 
positions taken by authorities in the jurisdiction that, when 
aggregated together, collectively constitute the position of 
authorities in the jurisdiction. In a similar vein, the proposed rule's 
reference to ``one or more authorities'' acknowledges that, in some 
jurisdictions, multiple authorities can take positions that impair the 
Board's ability to conduct inspections or investigations. Those 
``authorities'' are not limited to a ``foreign auditor oversight 
authority,'' as that phrase is defined in the Act,\86\ but rather 
include any authority whose position can obstruct the Board's 
oversight. Such authorities may include, for example, securities 
regulators, industry regulators, data protection authorities, national 
security bodies, foreign

[[Page 53708]]

ministries, or authorities of political subdivisions (e.g., a 
provincial authority).
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    \86\ See Section 2(a)(17) of the Act.
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Determinations as to a Particular Registered Firm With an Office in a 
Foreign Jurisdiction
    Although the Board anticipates that most determinations under the 
proposed rule would be jurisdiction-wide determinations, the Board 
cannot anticipate every scenario that it might encounter when 
conducting oversight of firms in foreign jurisdictions. In light of 
that practical limitation, subparagraph (a)(2) of the proposed rule 
provides that the Board may determine that it is unable to inspect or 
investigate completely a particular registered firm that has an office 
\87\ located in a foreign jurisdiction because of a position taken by 
one or more authorities in that jurisdiction. This provision would 
complement the Board's ability to make jurisdiction-wide determinations 
in two important respects.
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    \87\ The HFCAA authorizes the Board to make determinations as to 
firms having a ``branch'' or ``office'' in a foreign jurisdiction 
where the Board is unable to inspect or investigate completely 
because of a position taken by an authority in that jurisdiction. 
HFCAA Sec.  2(i)(2)(A), 15 U.S.C. 7214(i)(2)(A). Unlike in other 
contexts (such as banking), however, there is no commonly recognized 
distinction between a ``branch'' and an ``office'' with respect to 
accounting firms. Accordingly, the proposed rule refers only to an 
``office,'' which is a term commonly used by the Board in connection 
with its oversight programs. A majority of the commenters who 
addressed this rationale agreed with it.
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    First, if a foreign authority obstructs a Board inspection or 
investigation of a particular firm headquartered in the jurisdiction--
but does not obstruct inspections or investigations in a more general 
manner that might apply to all firms in the jurisdiction--subparagraph 
(a)(2) provides the Board with an avenue for making a more tailored 
determination under the HFCAA when a jurisdiction-wide determination 
might be inappropriately broad.
    Second, subparagraph (a)(2) allows the Board to make determinations 
under the HFCAA as to firms that are not headquartered in the foreign 
authority's jurisdiction but have an office located there. In this 
respect, a determination under subparagraph (a)(2) can supplement a 
jurisdiction-wide determination under subparagraph (a)(1) that applies 
to firms headquartered in the jurisdiction. Furthermore, the reach of 
subparagraph (a)(2) ensures that the Board's determinations under the 
proposed rule can match the scope of its mandate under the HFCAA.
    The Board's approach to determining where a firm's offices are 
located is similar to the Board's approach to determining where a firm 
is headquartered. The Board will look principally to the firm's filings 
with the Board,\88\ but if there is any uncertainty as to whether a 
firm has an office in a jurisdiction, the Board may consider other 
information regarding the firm and may request additional information 
from the firm pursuant to Rule 4000(b).
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    \88\ Firms are required to identify all of their offices when 
they first register with the Board (in Item 1.5 of the application 
for registration on Form 1) and annually thereafter (in Item 5.1 of 
the annual report on Form 2).
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    Apart from those two distinguishing features (namely, that 
determinations are directed to a particular firm and can reach firms 
that have an office in the foreign jurisdiction but are not 
headquartered there), subparagraph (a)(2) mirrors the operation of 
subparagraph (a)(1). The Board's inability ``to inspect or investigate 
completely'' is tied to the three principles that guide the Board's 
approach to international cooperation, as noted above and discussed 
further below. The phrase ``position taken by one or more authorities'' 
has the same meaning as in subparagraph (a)(1). Finally, if a member 
firm of an international firm network becomes subject to a Board 
determination under subparagraph (a)(2), and is a separate legal entity 
from the other member firms in the network and signs audit reports in 
its own name, the Board would not treat it as an ``office'' of other 
member firms within the network, and accordingly the other member firms 
would not be subject to that Board determination under subparagraph 
(a)(2).
    The Board adopted subparagraph (a)(2) as proposed, except for one 
addition to the subparagraph's title.\89\ Commenters generally 
supported the Board's proposed approach to determinations as to a 
particular registered firm and stated that the distinction between 
those determinations and the jurisdiction-wide determinations 
contemplated in subparagraph (a)(1) is clear. Several commenters also 
stated that it is appropriate for the Board to look at a firm's 
required filings with the Board in the first instance for information 
as to where the firm's offices are located, though two commenters 
suggested that the Board look beyond such filings to ascertain or 
validate the location of a firm's offices. As previously noted, the 
Board retains the ability to consider other relevant and reliable 
information, including the information identified by the commenters, 
when determining where a firm's offices are located.
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    \89\ The phrase ``Particular Registered Firm in a Foreign 
Jurisdiction'' has been revised to ``Particular Registered Firm With 
an Office in a Foreign Jurisdiction'' to mirror more closely the 
text of subparagraph (a)(2), create a parallel structure between the 
titles of subparagraphs (a)(1) and (a)(2), and provide a clearer 
contrast between the scope of those two subparagraphs.
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    One commenter requested guidance about the application of the 
proposed rule when a firm that is headquartered in a cooperative 
jurisdiction uses local personnel in a noncooperative jurisdiction to 
perform an audit for an issuer located in the noncooperative 
jurisdiction. In such a circumstance, the firm could not be subject to 
a jurisdiction-wide determination under subparagraph (a)(1) because it 
is not headquartered in a noncooperative jurisdiction, but it could be 
subject to a determination under subparagraph (a)(2) if it has an 
office in the noncooperative jurisdiction.
Timing of Board Determinations
    Subparagraph (a)(3) of the proposed rule addresses the timing of 
the Board's determinations under the HFCAA. Promptly after the Board's 
proposed rule becomes effective upon the Commission's approval, the 
Board will make any determinations under subparagraph (a)(1) or (a)(2) 
that are appropriate. Thereafter, the Board will consider, at least 
annually, whether changes in facts and circumstances support any 
additional determinations under subparagraph (a)(1) or (a)(2). If so, 
the Board will make such additional determinations, as and when 
appropriate, to allow the Commission on a timely basis to identify 
covered issuers in accordance with the Commission's rules.
    The Board is well positioned to assess the facts and circumstances 
surrounding its inspections and investigations and gauge whether and 
when a determination is appropriate under the proposed rule. The 
relevant circumstances in a jurisdiction can change quickly and 
unpredictably because foreign authorities can enact or amend laws, 
issue or modify rules or regulations, change their interpretation or 
application of those laws and rules, and otherwise take new positions 
with limited or no notice. The proposed rule allows the Board to make 
new determinations whenever appropriate, while acknowledging that the 
Board's timing will be informed by the Commission's process for timely 
identifying covered issuers and also establishing that the Board will 
consider whether new determinations are warranted at least once each 
year.
    When considering whether changed facts or circumstances provide a 
sufficient basis for a new Board

[[Page 53709]]

determination, the Board may confront a number of different scenarios. 
It is not possible to identify with specificity all the developments 
that might lead to a new determination, but they could include the 
enactment of a new law or regulation, a change in the interpretation or 
the application of an existing law or regulation, the termination of or 
failure to perform under an existing cooperative arrangement, and the 
failure to take or renew an administrative action necessary to 
facilitate the Board's oversight. The Board's experience in a 
particular inspection or investigation also could supply the grounds 
for a new Board determination in accordance with the proposed rule.
    The Board adopted subparagraph (a)(3) substantially as 
proposed.\90\ The majority of commenters who addressed this issue 
expressed support for the Board's approach to the timing of 
determinations.
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    \90\ For clarity, in the second sentence of the subparagraph, 
``changes in the facts and circumstances'' has been changed to 
``changes in facts and circumstances.''
---------------------------------------------------------------------------

    One commenter emphasized that the Board's approach should be 
sufficiently flexible so that Board determinations do not conflict with 
the language and intent of the HFCAA. The Board believes that 
subparagraph (a)(3) provides such flexibility, insofar as it provides 
that the Board will make any appropriate determinations promptly after 
the proposed rule becomes effective and thereafter will make additional 
determinations as and when appropriate to allow the Commission to 
identify covered issuers on a timely basis.
    Another commenter suggested that the Board require firms to file 
special reports on Form 3 to apprise the Board of headquarters or 
office location changes. Such changes already are reported to the Board 
annually on Form 2. The Board does not believe that a new Form 3 
reporting obligation should be imposed. If a firm opts to expose its 
issuer clients to the potential consequences of the HFCAA by moving the 
firm's headquarters to a jurisdiction that is subject to a 
jurisdiction-wide determination, such a change could be captured 
through the Board's current reporting procedures.\91\ Moreover, if a 
firm that is headquartered outside a noncooperative jurisdiction opens 
an office in a noncooperative jurisdiction, the Board would not 
anticipate making a determination as to that particular firm under 
subparagraph (a)(2) without evidence that the Board's ability to 
inspect and investigate the firm completely has become restricted as a 
result of the opening of the new office. Lastly, if a firm that is 
subject to a Board determination moves its headquarters out of or 
closes all of its offices in a noncooperative jurisdiction, the firm is 
required to notify the Board within five days of that development 
pursuant to subparagraph (e)(4) of the proposed rule, discussed below.
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    \91\ For instance, whenever the business mailing address of a 
firm's primary contact with the Board changes, the firm must file a 
special report on Form 3 that supplies the new address in Item 7.2. 
See PCAOB Rule 2203, Special Reports. Additionally, if a firm 
obtains a new license or certification to engage in the business of 
auditing or accounting from a governmental or regulatory authority, 
the firm must file a special report on Form 3 that identifies, in 
Item 6.2, the name of the state, agency, board, or other authority 
that issued the new license or certification. See id. And if a firm 
changes the jurisdiction under the law of which it is organized, the 
firm may file a Form 4 to succeed to the registration status of its 
predecessor. See PCAOB Rule 2109, Procedure for Succeeding to the 
Registration Status of a Predecessor.
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Factors for Board Determinations
    Paragraph (b) provides factors for Board determinations under the 
proposed rule. When determining whether it can ``inspect or investigate 
completely'' under subparagraph (a)(1) as to a particular jurisdiction 
or subparagraph (a)(2) as to a particular firm, the Board will assess 
whether ``the position taken by the authority (or authorities)'' in the 
jurisdiction ``impairs the Board's ability to execute its statutory 
mandate with respect to inspections or investigations,'' as detailed 
above.
    To make this assessment, the Board will evaluate three factors, 
which correlate to the three principles that guide the Board's approach 
to international cooperation. These factors embody the access the Board 
needs, and already experiences nearly worldwide, to fulfill its 
inspection and investigation mandates. Conceding on these factors in 
particular jurisdictions would dilute the Board's oversight in a 
selective, unequal manner and would be detrimental to the PCAOB's 
mission. In other words, this framework promotes a level playing field 
for U.S. and non-U.S. registered firms, in accordance with the Act's 
directive that non-U.S. registered firms are subject to the Act and the 
Board's rules in the same manner and to the same extent as U.S. 
registered firms.
    No commenter suggested other benchmarks or factors that the Board 
should employ when making determinations, and one commenter stated that 
the factors set forth in paragraph (b) are appropriate and clear. The 
Board adopted paragraph (b) as proposed, except for one addition to 
subparagraph (b)(2)'s second factor, as discussed below.
    The first factor is ``the Board's ability to select engagements, 
audit areas, and potential violations to be reviewed or investigated.'' 
The ability to make such selections is critical to the Board's 
oversight activities and is embedded in its statutory mandate.\92\ This 
factor would encompass situations in which a foreign authority takes 
the position that certain engagements, or certain parts of engagements, 
cannot be reviewed during an inspection, or that the Board cannot 
decide when (i.e., in which inspection year) certain engagements will 
be reviewed. It also would encompass situations in which a foreign 
authority takes the position that the Board cannot decide what 
potential violations it will investigate. No commenter expressed the 
view that this factor is unclear or inappropriate or sought further 
guidance about it.
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    \92\ See, e.g., Sections 104(d) and 105(b)(1) of the Act.
---------------------------------------------------------------------------

    The second factor is ``the Board's timely access, and the ability 
to retain and use, any document or information (including through 
conducting interviews and testimony) in the possession, custody, or 
control of the firm(s) or any associated persons thereof that the Board 
considers relevant to an inspection or investigation.'' The Board's 
access to firm personnel, documents, and information is pivotal to its 
inspections and investigations, and is built into its mandate to 
oversee the audits of issuers that avail themselves of the U.S. capital 
markets.\93\
---------------------------------------------------------------------------

    \93\ See, e.g., Sections 104(d) and 105(b)(2) of the Act.
---------------------------------------------------------------------------

    One commenter suggested that the Board add ``timely'' to this 
factor so that it refers to ``timely access,'' and, after 
consideration, the Board has made that revision. The Board agrees with 
the commenter that the Board cannot inspect or investigate completely 
if its access to documents or information is not timely. Unreasonable 
delays in obtaining documents or information hinder the Board's ability 
to execute its statutory mandate \94\ and therefore its ability to 
protect the interests of investors and further the public interest. No 
other commenter made any suggestions regarding this factor, and no 
commenter asserted that this factor is

[[Page 53710]]

unclear or inappropriate or sought further guidance about it.
---------------------------------------------------------------------------

    \94\ See, e.g., Section 104(b) of the Act (specifying inspection 
frequency requirements); Section 105(b)(2)(B) of the Act 
(authorizing the Board to require production of audit work papers 
and other documents or information); PCAOB Rule 5103(b) (providing 
that requests for documents or information shall set forth ``a 
reasonable time . . . for production'').
---------------------------------------------------------------------------

    The third factor is ``the Board's ability to conduct inspections 
and investigations in a manner consistent with the provisions of the 
Act and the Rules of the Board, as interpreted and applied by the 
Board.'' This provision captures all of the other aspects of the 
Board's inspection and investigation mandates not already subsumed in 
the first and second factors. That includes the Board's ability to 
satisfy inspection frequency requirements,\95\ to identify potentially 
violative acts during inspections,\96\ to impose sanctions for 
noncooperation with an investigation,\97\ and to share information with 
the Commission and other regulators.\98\ No commenter indicated that 
this factor is unclear or inappropriate or sought further guidance 
about it.
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    \95\ See Section 104(b) of the Act.
    \96\ See Section 104(c)(1) of the Act.
    \97\ See Section 105(b)(3)(A) of the Act.
    \98\ See Sections 104(c)(2) and 105(b)(4)-(5) of the Act.
---------------------------------------------------------------------------

    Importantly, these three factors do not function as separate 
prerequisites for a Board determination. Instead, impairment in any one 
respect may be sufficient under the circumstances to support a Board 
determination. To underscore the disjunctive nature of this three-
factor analysis, the proposed rule provides that the Board will assess 
whether its ability to execute its mandate has been impaired in ``one 
or more'' of these three respects. No commenter objected to, or 
expressed concerns about, this approach.
    Additionally, to make a determination under the proposed rule, the 
Board does not need to conclude that it has been impaired as to both 
its inspections and its investigations. The HFCAA authorizes the Board 
to make a determination if the Board is unable to inspect ``or'' 
investigate completely, and the proposed rule uses ``or'' in similar 
fashion: It is enough that the Board is impaired in its ability to 
execute its mandate with respect to either inspections or 
investigations. This approach is consistent with the HFCAA, and no 
commenter suggested otherwise.
Basis for Board Determinations
    Paragraph (c) of the proposed rule addresses the basis for a Board 
determination. This provision establishes, first and foremost, that 
when assessing whether its ability to execute its mandate has been 
impaired, the Board may consider ``any documents or information it 
deems relevant.'' From there, the proposed rule specifies, for the 
avoidance of doubt, three non-exclusive categories of documents and 
information that the Board can rely upon when making a determination. 
No commenter objected to this approach or expressed concern about the 
three non-exclusive categories identified in the proposed rule, and one 
commenter stated that paragraph (c) provides adequate and substantive 
guidance. The Board adopted paragraph (c) as proposed.
    Subparagraph (c)(1) states that the Board may consider a foreign 
jurisdiction's laws, statutes, regulations, rules, and other legal 
authorities; in other words, the black-letter law of the foreign 
jurisdiction (and any political subdivisions thereof) in all of its 
varying forms. The Board also may consider relevant interpretations of 
those laws, whether by the promulgating authority or others, as well as 
real-world applications of those laws.
    Subparagraph (c)(2) provides that the Board may consider the 
entirety of its efforts to reach and secure compliance with agreements 
with foreign authorities in the jurisdiction. In so doing, the Board 
can take into account whether an agreement was reached, the terms of 
any such agreement, and the foreign authorities' interpretation of and 
performance under any such agreement.
    Subparagraph (c)(3) recognizes that the Board may consider its 
experience with foreign authorities' other conduct and positions 
relative to Board inspections or investigations. This allows the Board 
to consider the totality of a foreign authority's prior conduct and 
positions in all contexts, including public and private statements 
made, positions asserted, and actions taken. This provision also may 
encompass circumstances where a foreign authority precipitously changes 
its position regarding PCAOB access without making any change to its 
laws or demanding any form of cooperative agreement.
    Together, these provisions establish that the Board can consider 
any relevant information (including, but not limited to, the three 
categories of information discussed above) when making a determination. 
As a corollary, paragraph (d) of the proposed rule establishes that the 
Board's determination need not depend on the Board's ``commencement of, 
but inability to complete, an inspection or investigation.'' The Board 
should not be expected to attempt to initiate inspections or 
investigations in a foreign jurisdiction that rejects the guiding 
principles for international cooperation, because such futile efforts 
would not advance the Board's mission of protecting investors and 
furthering the public interest in the preparation of informative, 
accurate, and independent audit reports. No commenter challenged the 
Board's reasoning or expressed the view that the Board must initiate an 
inspection or investigation as a prerequisite to making a determination 
under the HFCAA. Nor did any commenter indicate that the approach 
described in paragraph (d) is inappropriate. The Board adopted 
paragraph (d) as proposed.
Form and Publication of Board Determinations
Board Reports to the Commission
    The HFCAA does not specify how the Board should communicate its 
determinations to the Commission. Subparagraph (e)(1) of the proposed 
rule establishes that process.
    When the Board makes a determination, whether as to a particular 
jurisdiction under subparagraph (a)(1) or a particular firm under 
subparagraph (a)(2), the Board's determination will be issued in the 
form of a report to the Commission.\99\ Such a reporting process is 
authorized under Sections 101(c)(5), 101(g)(1), and 101(f)(6) of the 
Act.\100\
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    \99\ The Board will decide whether to conduct a public or non-
public meeting to consider a potential determination under the HFCAA 
in accordance with the PCAOB bylaws. See Bylaw 5.1, Governing Board 
Meetings.
    \100\ See Section 101(c)(5) of the Act (the Board shall 
``perform such other duties or functions as the Board . . . 
determines are necessary or appropriate . . . to carry out this 
Act''); Section 101(g)(1) of the Act (the Board's rules ``shall . . 
. provide for . . . the performance of its responsibilities under 
this Act''); Section 101(f)(6) of the Act (the Board is authorized 
to ``do any and all . . . acts and things necessary, appropriate, or 
incidental to . . . the exercise of its obligations . . . imposed'' 
by the Act).
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    The Board's report will describe its assessment of whether the 
position taken by the foreign authority (or authorities) impairs the 
Board's ability to execute its mandate with respect to inspections or 
investigations. The report will analyze the relevant factor(s) set 
forth in paragraph (b) and describe the basis for the Board's 
conclusions. The Board will identify the firm(s) subject to the Board's 
determination in two ways: by the name under which the firm is 
registered with the Board, and by the firm's identification number with 
the Board. No commenter identified any additional information that 
should be included in the Board's reports to the Commission.
    The Board adopted subparagraph (e)(1) as proposed but with one 
modification: The Board will identify the firm(s) to which a 
determination applies in an appendix to the Board's report. Identifying 
such firms in a

[[Page 53711]]

separate appendix will facilitate the Board's efforts to keep the list 
of firms subject to the determination current, as discussed below.
Publication of Board Reports
    Promptly after the Board issues a report to the Commission, a copy 
of the report will be made publicly available on the PCAOB's website. 
The Board expects that a copy of the report ordinarily will be 
prominently featured on the Board's website on or about the same day 
the Board issues its report to the Commission.
    Subparagraph (e)(2) of the proposed rule specifies, however, that 
the content of the Board's publicly available report will be subject to 
two limitations. First, the Board will be bound by Section 105 of the 
Act, which provides, in pertinent part, that ``all documents and 
information prepared or received by or specifically for the Board . . . 
in connection with an inspection . . . or with an investigation . . . 
shall be confidential . . . , unless and until presented in connection 
with a public proceeding or released'' in accordance with Section 
105(c) of the Act.\101\ If the Board's report contains material 
encompassed by Section 105(b)(5)(A) of the Act, such material will be 
redacted from the publicly available version of the report posted on 
the PCAOB's website, in accordance with the Act.
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    \101\ Section 105(b)(5)(A) of the Act.
---------------------------------------------------------------------------

    Second, while the Board does not anticipate that such situations 
will frequently arise, the version of the Board's report posted on the 
PCAOB's website will be redacted if it contains proprietary, personal, 
or other information protected by applicable confidentiality laws. In 
this respect, the proposed rule aligns with the Act's treatment of 
registration applications and annual reports filed with the Board, 
which the Board may make publicly available subject to ``applicable 
laws relating to the confidentiality of proprietary, personal, or other 
information.'' \102\
---------------------------------------------------------------------------

    \102\ Section 102(e) of the Act.
---------------------------------------------------------------------------

    Commenters generally supported redacting from the Board's publicly 
available reports any information that is subject to applicable 
confidentiality laws. One commenter suggested that redaction should not 
be limited to information covered by applicable confidentiality laws, 
but rather should be based on broader concepts of confidentiality. That 
commenter offered one example of such a concept, but that example--
accountants' professional responsibilities of confidentiality--does not 
apply to the Board's performance of its oversight functions. Another 
commenter similarly suggested that redaction should extend to all 
confidential information whether explicitly covered by confidentiality 
laws or not, but that commenter did not suggest how to define this 
broader concept of confidential information or what categories of 
information it would encompass. Neither of these commenters identified 
any specific type of relevant information that is not subject to a 
confidentiality law but is nevertheless worthy of protection under a 
broader view of confidential information.
    Besides one minor revision unrelated to redaction,\103\ the Board 
adopted subparagraph (e)(2) as proposed. The Board believes that it is 
appropriate to limit redaction to confidential information protected by 
law. That approach comports with the Board's congressionally mandated 
treatment of registration applications and annual reports, which the 
Board also has extended to other reports filed with the Board. This 
approach also is more readily administrable than one that relies 
instead on broader, undefined concepts of confidentiality.
---------------------------------------------------------------------------

    \103\ For simplicity, the phrase ``Board report containing a 
determination pursuant to subparagraph (a)(1) or (a)(2)'' has been 
changed to ``Board report pursuant to subparagraph (e)(1).''
---------------------------------------------------------------------------

Transmittal of Board Reports to Subject Firms
    The Board revised the proposed rule to add a new provision 
regarding the transmittal of reports to firms that are subject to a 
determination. While some commenters stated that posting Board reports 
on the Board's website would give sufficient notice of Board 
determinations to such firms, other commenters disagreed, and the Board 
has concluded that it would be prudent to transmit reports to those 
firms.
    Subparagraph (e)(3) provides that promptly after the Board issues a 
report to the Commission under subparagraph (e)(1), a copy of the 
report will be sent by electronic mail to each registered public 
accounting firm that is listed in the appendix to that report (i.e., 
each firm as to which the determination applies). The Board expects 
that the report will be transmitted to the subject firm(s) by 
electronic mail after it has been posted on the Board's website, though 
both actions will take place promptly after the issuance of the report. 
Such reports will be redacted to the extent required by confidentiality 
laws, and the electronic mail will be directed to the electronic mail 
address of the firm's primary contact with the Board.\104\
---------------------------------------------------------------------------

    \104\ When applying to register with the Board, firms provide an 
electronic mail address for their primary contact with the Board in 
Item 1.3.7 of Form 1. Thereafter, firms confirm the electronic mail 
address for their primary contact with the Board annually in Item 
1.3 of Form 2. If that electronic mail address changes, the firm 
must notify the Board within 30 days of the new electronic mail 
address for its primary contact with the Board in Item 7.2 of Form 
3.
---------------------------------------------------------------------------

    Two commenters suggested that the Board provide non-public advance 
notice of a forthcoming determination to firms that would be subject to 
that determination. One of those commenters indicated that firms could 
use this advance notice to initiate discussions with their issuer audit 
clients about the Board's forthcoming determination.
    The Board does not believe that it is appropriate to provide non-
public advance notice to firms. A firm headquartered in a 
noncooperative jurisdiction and performing audit work that subjects the 
firm to the PCAOB inspection requirement should know if it has not been 
inspected due to the PCAOB's inability to inspect such firm or firms in 
that jurisdiction.\105\ Furthermore, as described above, the Board has 
long taken efforts to make known the access challenges it faces in 
certain jurisdictions. Although those disclosures are distinct from 
determinations under the proposed rule and predate the HFCAA's 
enactment, they underscore the Board's commitment to transparency about 
its oversight access. And if a firm-specific obstacle to Board 
inspections or investigations were to arise that might warrant a 
determination as to a particular registered firm pursuant to 
subparagraph (a)(2), the Board expects that it would have engaged with 
that firm about the Board's inability to inspect or investigate the 
firm completely before such a determination would be made.
---------------------------------------------------------------------------

    \105\ See also, e.g., SEC Exchange Act Release No. 91364, at 26 
(noting ``a highly similar type and pattern of disclosure regarding 
the PCAOB's inability to inspect those firms'' in Item 3 of Form 20-
F and in Item 1A of Form 10-K).
---------------------------------------------------------------------------

    In addition, providing non-public advance notice of a Board 
determination to firms would create information asymmetry in the 
marketplace: A forthcoming Board determination would be known to firms 
and to anyone with whom the firm elects to share that information 
(including not only the firm's issuer clients' management, but also 
potentially the issuers' directors, the issuers' outside counsel and 
other professional advisors, foreign government officials, and others), 
while

[[Page 53712]]

the investing public would not be privy to the same information. The 
Board does not believe it would be in the public interest or the 
interests of investors to selectively preview its determinations in 
such a manner.
    Several commenters also suggested that the Board establish a rule-
based mechanism that would allow firms to submit information to the 
Board regarding a determination. Some of those commenters recommended 
that the Board provide by rule for such a submission process before a 
Board determination takes effect, while others expressed concern that 
such an approach could delay the timely implementation of the HFCAA. No 
commenter, however, identified any type of information that a firm 
might have that would be both relevant to a Board determination and 
previously unknown to the Board.
    Because the Board believes that firms are unlikely to have new and 
relevant information regarding a determination, the Board is not 
establishing a rule-based process for firms to make such submissions. 
Board determinations turn on positions taken by authorities in foreign 
jurisdictions, and such positions, by virtue of having previously been 
``taken'' by a foreign authority, necessarily will be known to the 
Board already. Indeed, the Board has extensive experience in this area 
and, over more than a decade, has engaged significantly with foreign 
authorities and registered firms regarding inspections and 
investigations of non-U.S. firms. Therefore, the Board knows, and will 
timely learn, relevant information about its ability to conduct 
inspections and investigations abroad. The Board's history of 
engagement and negotiations regarding such inspections and 
investigations is detailed above, and no commenter disputed the Board's 
description of that history.
    By the same token, any Board determination would be based on the 
Board's judgment as to whether the extent of access available to it 
impairs its ability to conduct oversight in any of the three respects 
identified in paragraph (b). Consequently, the Board does not believe 
that firms will be able to contribute meaningfully to the mix of 
information available to the Board regarding foreign authorities' 
positions or the Board's experience-driven assessment of paragraph 
(b)'s three factors. Should a firm wish to communicate with the Board 
about its inspection or investigation experience, however, it can do so 
through existing channels for communicating with the Board's inspection 
and enforcement staff.
Updating the Appendix to a Board Report
    Subparagraph (e)(4) addresses the Board's process for determining 
that the list of firms subject to a determination remains accurate. A 
few commenters expressed concern about potential developments that 
could render such a list inaccurate, and the Board believes that it is 
prudent to establish a process in the proposed rule to ensure the list 
is appropriately updated and accurate.
    As provided in subparagraph (e)(1), the list of firms subject to a 
determination will be contained in an appendix to the Board's report. 
For a jurisdiction-wide determination under subparagraph (a)(1), the 
appendix will provide, for each firm, the name under which it is 
registered with the Board, its identification number with the Board, 
and the jurisdiction in which its headquarters is located. For a 
determination as to a particular firm under subparagraph (a)(2), the 
appendix will provide the name under which the firm is registered with 
the Board, its identification number with the Board, and the location 
of the office(s) the firm maintains in the foreign jurisdiction whose 
authorities have taken a position that results in the Board being 
unable to inspect or investigate the firm completely.
    Subparagraph (e)(4) requires firms identified in an appendix to 
notify the PCAOB Secretary of any changes to the firm's information in 
the appendix within five days of such a change.\106\ Firm names, 
identification numbers, headquarters locations, and office locations 
can change, and this requirement ensures that the Board will be alerted 
promptly to updated information.\107\ Instructions regarding how to 
notify the Secretary of such a change will be provided in the appendix.
---------------------------------------------------------------------------

    \106\ In practice, this five-day period would span at least 
seven calendar days. See PCAOB Rule 1002, Time Computation 
(providing that Saturdays, Sundays, and federal legal holidays are 
excluded from the computation of time when a prescribed period of 
time in a Board rule is seven days or less).
    \107\ For example, if a firm changes its name while remaining 
the same legal entity, the firm has 30 days to notify the Board of 
its name change in Item 7.1 of Form 3. But if a firm changes its 
name while also changing its legal entity due to a change to its 
legal form of organization or as the result of a business 
combination, the firm may (but is not required to) file a Form 4 
that, among other things, would notify the Board of the name change 
in Item 1.1, and that filing would be due 14 days after the change 
or business combination, unless the Board permits the firm to file 
its form out of time.
---------------------------------------------------------------------------

    Subparagraph (e)(4) provides that the Board may issue an updated 
appendix at any time. This allows the Board to update its appendix to 
reflect changes reported by firms as required by subparagraph (e)(4). 
It also enables the Board to correct discrepancies or reflect changes 
identified by the Board or its staff through other means.\108\ An 
updated appendix will bear the date on which it was issued by the 
Board.
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    \108\ For instance, the list of firms in the appendix could be 
reduced if a firm withdraws from registration or has its 
registration revoked, and could be expanded if a registered firm 
moves its headquarters to a jurisdiction that is the subject of a 
jurisdiction-wide determination.
---------------------------------------------------------------------------

    The Board's issuance of an updated appendix would not constitute a 
reassessment of the Board's underlying determination. In other words, 
the Board can update an appendix without reanalyzing the three factors 
identified in paragraph (b). Whenever the Board issues an updated 
appendix, it will transmit that appendix to the Commission, make it 
publicly available in accordance with subparagraph (e)(2), and send it 
to firms that are identified in the appendix in accordance with 
subparagraph (e)(3).
Effective Date and Duration of Board Determinations
    Paragraph (f) provides that a Board determination becomes effective 
on the date the Board issues its report to the Commission. Most 
commenters expressed support for this timing, though one commenter 
suggested that this timing would be appropriate only if firms received 
advance notice of a determination, and another commenter suggested that 
the Board delay the effectiveness of its determinations (e.g., for 120 
days) so that issuers have time to understand and plan for them.
    The Board adopted paragraph (f) substantially as proposed.\109\ For 
many of the same reasons that the Board does not believe that firms 
should receive advance notice of Board determinations (as discussed 
above), the Board does not believe that the effectiveness of its 
determinations should be delayed. Furthermore, delaying the 
effectiveness of a determination could frustrate the objectives of the 
HFCAA and, in the Board's view, impair the Commission's ability to 
identify covered issuers on a timely basis pursuant to its rules.
---------------------------------------------------------------------------

    \109\ For simplicity, at the beginning of the paragraph, ``When 
the Board makes a determination pursuant to subparagraph (a)(1) or 
(a)(2), the Board's determination becomes effective'' has been 
replaced by ``A determination pursuant to subparagraph (a)(1) or 
(a)(2) becomes effective.''
---------------------------------------------------------------------------

    One commenter requested clarification regarding the date of 
issuance of a Board report. The date of issuance will be the date that 
appears on the report, which will correspond to the date upon which the 
Board's report is transmitted to the Commission.

[[Page 53713]]

    Paragraph (g) addresses the duration of Board determinations. The 
Board adopted paragraph (g) substantially as proposed,\110\ save for 
one conforming change. As first proposed, the proposed rule provided 
that a Board determination would remain in effect ``unless and until'' 
it was modified or vacated. As discussed below, however, the Board has 
elected to reassess at least annually each determination that is in 
effect and to issue, at the conclusion of each reassessment, a report 
reaffirming, modifying, or vacating the determination. To conform to 
that approach, paragraph (g) has been revised to provide that a Board 
determination will remain in effect until it is reaffirmed, modified, 
or vacated by the Board.
---------------------------------------------------------------------------

    \110\ For simplicity, at the beginning of the paragraph, ``A 
determination made by the Board'' has been changed to ``A 
determination.''
---------------------------------------------------------------------------

Reassessment of Board Determinations
    As first proposed, paragraph (h) created a two-step process through 
which the Board would annually monitor the continued justification for 
a Board determination. First, the Board would consider whether changes 
in facts and circumstances warrant a reassessment of a determination 
that is in effect. Then, if the Board concludes that a reassessment is 
warranted, the Board would analyze the three factors identified in 
paragraph (b) and decide whether to leave its determination undisturbed 
or issue a new report modifying or vacating the determination. Apart 
from that annual process, the Board also could reassess a determination 
on its own initiative or at the Commission's request at any time.
    Commenters generally supported that proposed two-step annual 
process. A few commenters suggested that the result of a reassessment 
should be made public in all circumstances, even when a determination 
is left undisturbed, and one commenter indicated that such public 
reporting could provide audit firms and issuers with more detailed 
guidance and transparent information. Some commenters suggested that 
firms should be able to request reevaluation of a determination outside 
of the annual cycle, with one commenter asking the Board to confirm 
that it would reassess a determination anytime there was a potentially 
material development in the facts and circumstances.
    The Board has revised paragraph (h) to reduce the two-step process 
to a one-step process by eliminating the ``annual consideration of 
changed facts and circumstances'' contemplated in the proposed rule. 
Instead of requiring the Board to conduct a threshold inquiry each year 
to decide whether changes in facts and circumstances merit reassessment 
of a determination, the proposed rule requires the Board to annually 
reassess each determination that is in effect. The Board believes that 
annual reassessment best aligns with the HFCAA's annual cycle, which 
includes the Commission's identification of covered issuers based on 
the filing of annual reports and its designation of non-inspection 
years.\111\
---------------------------------------------------------------------------

    \111\ HFCAA Sec.  2(i)(1)-(2), 15 U.S.C. 7214(i)(1)-(2).
---------------------------------------------------------------------------

    Apart from its mandatory annual reassessments, the Board, on its 
own initiative or at the Commission's request, may reassess a 
determination at any time. It is not possible to specify every 
development that might prompt the Board to reassess a determination 
outside of the annual reassessment cycle. In certain circumstances, the 
withdrawal of a law or the execution of a cooperative agreement might 
suffice, if, for example, the law or the absence of an agreement were 
the sole reason why the Board's access was impaired in one or more of 
the respects identified in paragraph (b). However, as a general matter, 
when a determination derives from the Board's prolonged inability to 
complete inspections or investigations in a particular jurisdiction or 
of a particular firm, the Board does not anticipate modifying or 
vacating such a determination--even if a cooperative agreement is in 
place--until it has concluded that the foreign authority has taken, and 
the Board can reasonably conclude that the authority will maintain, new 
positions that respond satisfactorily to the Board's access needs with 
respect to each of the factors identified in paragraph (b). In such 
instances of prolonged lack of access, the Board would expect to 
conclude inspections or investigations in that jurisdiction or of that 
firm before modifying or vacating a determination. The conclusion of an 
inspection or investigation, however, is not necessarily conclusive 
evidence that the conditions preventing the Board from inspecting or 
investigating completely firms located in the foreign jurisdiction have 
been resolved.
    Together, the proposed rule's framework of mandatory annual 
reassessment and discretionary off-cycle reassessment gives the Board 
the opportunity to reassess a determination whenever facts and 
circumstances warrant, and will help ensure that the Commission's 
actions under the HFCAA are based on Board determinations that reflect 
the current status of the Board's ability to inspect and investigate 
firms completely. When conducting a reassessment, whether annual or 
off-cycle, the Board will reanalyze the three factors identified in 
paragraph (b), and at the conclusion of that reassessment, the Board 
will reaffirm, modify, or vacate its determination.
    Two commenters suggested that the Board allow firms to request 
reevaluation of a determination outside of the Board's annual 
reassessment process. One commenter further suggested that reevaluation 
requests could be based on a triggering event, but did not provide any 
examples of such an event or explain how a firm would have knowledge of 
such an event that the Board would lack. As explained above, the Board 
believes that firms are unlikely to have new, relevant information 
about positions taken by foreign authorities vis-[agrave]-vis the 
Board, and firms already have other channels through which they can 
communicate with the Board's staff about inspection- and investigation-
related developments. Furthermore, even without a rule-based mechanism 
through which firms could request reevaluation, the Board will reassess 
determinations to which any firm is subject at least once a year.
    One commenter suggested that the Board allow ``jurisdictions'' to 
request reevaluation of determinations at any time. That commenter was 
not a foreign authority; indeed, no foreign authority submitted a 
comment asking for the ability to request reevaluation. Nor did the 
commenter explain why foreign authorities cannot communicate with the 
Board through existing channels. The Board believes that those 
customary channels for communication with foreign authorities, together 
with the Board's annual mandatory reassessments and discretionary off-
cycle reassessments, suffice to provide the Board appropriate 
information to reexamine determinations as and when appropriate.
Reaffirmed, Modified, and Vacated Board Determinations
    Paragraph (i) addresses reaffirmed, modified, and vacated Board 
determinations. The Board adopted paragraph (i) with several conforming 
changes that align paragraph (i) with other revisions to the proposed 
rule, including revisions regarding appendices to Board reports, the 
transmittal of Board reports by electronic mail, and annual 
reassessment of determinations that are in effect.
    When the Board reaffirms, modifies, or vacates a determination, it 
will issue a report to the Commission describing its assessment and the 
basis for

[[Page 53714]]

reaffirming, modifying, or vacating the determination. In the case of a 
reaffirmed or modified determination, the Board will update the 
appendix to the report that identifies the firm(s) to which the 
determination applies. A copy of the report will be posted on the 
PCAOB's website and sent by electronic mail to each firm's primary 
contact with the Board, subject to the confidentiality limitations 
described above in connection with subparagraphs (e)(2) and (e)(3).
    A reaffirmed or modified determination, or the vacatur of a 
determination, will become effective on the date that the Board issues 
its report to the Commission. A reaffirmed or modified determination 
will be subject to reassessment under paragraph (h): It must be 
reassessed at least annually; it may be reassessed at any time; and the 
Board's reassessment will consider the three factors identified in 
paragraph (b) and result in reaffirmation, modification, or vacatur. A 
reaffirmed or modified determination will remain in effect until it is 
reaffirmed, modified, or vacated.

D. Economic Considerations

    The Board is mindful of the economic impacts of its rulemaking. 
This section discusses economic considerations related to the proposed 
rule, including the need for the rulemaking; a description of the 
baseline for evaluating the economic impacts of the proposed rule; 
consideration of the benefits, costs, and unintended consequences of 
the proposed rule; and alternatives considered by the Board.
    The proposed rule does not require ``mandatory audit firm rotation 
or a supplement to the auditor's report in which the auditor would be 
required to provide additional information about the audit and the 
financial statements'' of issuers, nor does it impose any ``additional 
requirements'' on auditors.\112\ Accordingly, the Board has concluded 
that Section 103(a)(3)(C) of the Act does not apply to this rulemaking, 
and no commenter suggested otherwise.
---------------------------------------------------------------------------

    \112\ Section 103(a)(3)(C) of the Act.
---------------------------------------------------------------------------

Need for Rulemaking
    As discussed in Section C above, the HFCAA does not expressly 
require the Board to adopt a rule governing the determinations it makes 
under the statute. Rather, the HFCAA gives the Board discretion 
regarding the procedure for making those determinations and the content 
and format of the Board's reporting to the Commission. The Board 
elected to pursue a rulemaking to bring transparency and consistency to 
its determinations. Specifically, the Board believes that a rule would 
inform investors, registered firms, issuers, audit committees, foreign 
authorities, and the public at large as to how the Board will perform 
its functions to satisfy its obligations under the statute. It also 
would promote consistency in the Board's process regarding 
determinations.
Baseline
    The Board has evaluated the potential benefits, costs, and 
unintended consequences of the proposed rule relative to a baseline 
that consists of the current regulatory framework and current market 
practices. Although the HFCAA requires the Board to make a 
determination about which audit firms located in a foreign jurisdiction 
it is unable to inspect or investigate completely because of a position 
taken by one or more authorities in that jurisdiction, the HFCAA does 
not expressly require the Board to adopt a rule governing the 
determinations it makes under the statute. Moreover, the PCAOB website 
has long identified the jurisdictions in which the Board lacks 
inspection access, as well as the registered firms located in those 
jurisdictions.\113\ Measured against this baseline, the proposed rule 
builds on existing PCAOB practices and provides a framework for the 
Board's determinations under the HFCAA and, hence, should have limited 
economic impacts incremental to the impacts of the HFCAA and the 
Commission's actions to implement the HFCAA.
---------------------------------------------------------------------------

    \113\ For an overview of this historical practice, see, for 
example, footnote 62.
---------------------------------------------------------------------------

    Under the HFCAA, issuers that retain firms that are subject to a 
Board determination to issue audit reports on their financial 
statements must make certain disclosures and submissions and, 
eventually, if certain conditions persist, the securities of those 
issuers may be subject to a prohibition on trading. The Commission has 
adopted interim final amendments to Forms 20-F, 40-F, 10-K, and N-CSR 
to implement the disclosure and submission requirements of the 
HFCAA.\114\ Other aspects of the HFCAA, including the trading 
prohibition, will be addressed in subsequent Commission actions.\115\ 
The economic impact of these aspects of the HFCAA, while tied to the 
Board's determinations about which audit firms it is unable to inspect 
or investigate completely, will depend on the implementation choices 
made by the Commission in carrying out its mandate under the HFCAA and 
thus are not considered as part of the economic analysis with respect 
to this rulemaking.
---------------------------------------------------------------------------

    \114\ See SEC Exchange Act Release No. 91364. The interim final 
rule amendments became effective on May 5, 2021.
    \115\ See id.
---------------------------------------------------------------------------

    The baseline also takes into consideration the current 
international reach of the Board's oversight mandate. As of June 30, 
2021, 851 non-U.S. firms, headquartered in 90 foreign jurisdictions, 
were registered with the Board.\116\ Out of those 851 non-U.S. 
registered firms, 202 issued at least one audit report on financial 
statements filed by an issuer with the Commission in the 12-month 
period ended June 30, 2021, and, altogether, they issued 1,260 audit 
reports during that 12-month period.\117\
---------------------------------------------------------------------------

    \116\ Source: PCAOB Registration, Annual, and Special Reporting 
(``RASR'') System and Audit Analytics.
    \117\ If a firm issued more than one audit report on financial 
statements filed by the same issuer during the 12-month period ended 
June 30, 2021, then only the most recent audit report is counted.
---------------------------------------------------------------------------

    Exhibit 1 reports the jurisdictions with the highest number of 
audit reports issued by non-U.S. registered firms on financial 
statements filed by issuers with the Commission during the 12-month 
period ended June 30, 2021. The top 15 jurisdictions account for 84% of 
all audit reports issued by non-U.S. registered firms on financial 
statements filed by issuers during the 12-month period ended June 30, 
2021.

[[Page 53715]]

[GRAPHIC] [TIFF OMITTED] TN28SE21.001

    As discussed in Section C above, over the years, the Board has been 
able to work effectively with authorities in foreign jurisdictions to 
fulfill its mandate to oversee registered firms located outside the 
United States. With rare exceptions, foreign audit regulators have 
cooperated with the Board and allowed it to exercise its oversight 
authority as it relates to registered firms located within their 
respective jurisdictions. Authorities in a limited number of foreign 
jurisdictions, however, have taken positions that deny the Board access 
for oversight activities. The PCAOB's website identifies the 
jurisdictions that currently deny the Board such access.\119\
---------------------------------------------------------------------------

    \118\ For purposes of Exhibit 1, a firm's jurisdiction is the 
jurisdiction where it is headquartered. The number of audit reports 
issued on the financial statements of issuers and the number of 
registered firms that issued those reports are based on issuer 
filings during the 12-month period ended June 30, 2021. The market 
capitalization of those issuers and the number of registered firms 
in each jurisdiction are as of June 30, 2021. Due to a lack of data 
on the number of shareholders, some audit reports included in 
Exhibit 1 may have been issued on the financial statements of 
entities with fewer than 300 shareholders. If a firm issued more 
than one audit report on financial statements filed by the same 
issuer during the 12-month period ended June 30, 2021, then only the 
most recent audit report is counted.
    \119\ See Audit Reports Issued by PCAOB-Registered Firms in 
Jurisdictions where Authorities Deny Access to Conduct Inspections, 
available at https://pcaobus.org/oversight/ational/denied-access-to-inspections. The information contained on this web page does not 
constitute a Board determination under the HFCAA. The Board has not 
yet made any determinations under the HFCAA.
---------------------------------------------------------------------------

Considerations of the Benefits, Costs, and Unintended Consequences
    Compared to the baseline of no PCAOB rulemaking, the proposed rule 
would have incremental benefits and costs. The proposed rule's scope is 
confined to establishing a framework for determinations that the Board 
is called upon by the HFCAA to make even absent a rulemaking. 
Additionally, neither the HFCAA nor the proposed rule gives the Board 
additional authority to take any action of legal consequence directly 
against a registered firm. Instead, the HFCAA contemplates that the 
Board would notify the Commission of its determinations, which may 
provide the predicate for other regulatory actions to be taken by the 
Commission if other conditions set forth in the HFCAA and the 
Commission's rules are met. This situation is in contrast to the direct 
impact of the Board's statutory mandate to register, set professional 
standards for, inspect, investigate, and discipline registered firms. 
One commenter stated that economic benefits and costs arise from the 
HFCAA, which the PCAOB cannot change and must implement.
    The Board's analysis of the potential benefits, costs, and 
unintended consequences of the proposed rule does not presuppose any 
determination that the Board may make under the proposed rule, because 
the Board would determine whether to make any future determimations 
based on the facts and circumstances at that time. The Board's analysis 
discusses the economic impacts of four central features of the proposed 
rule: (1) The Board's ability to make determinations as to a particular 
foreign jurisdiction; (2) limiting those jurisdiction-wide 
determinations to firms headquartered in the jurisdiction; (3) the 
Board's complementary ability to make determinations as to a particular 
registered firm; and (4) the Board's publication of its determinations 
on its website. The analysis is qualitative in nature because of a lack 
of information and data necessary to provide reasonable quantitative 
estimates. Overall, the Board expects that the benefits of the proposed 
rule will justify

[[Page 53716]]

any costs and unintended negative effects.
Benefits
    The Board believes that the proposed rule would inform investors, 
registered firms, issuers, audit committees, foreign authorities, and 
the public at large as to how the Board will perform its functions 
under the HFCAA. The improved transparency and reduced regulatory 
uncertainty might help market participants make more efficient 
investment decisions and, hence, enhance capital formation. 
Furthermore, the proposed rule will promote consistency in the Board's 
processes regarding determinations. It will also assist the Commission 
in its consistent implementation of the HFCAA and achieving the 
statute's intended objectives. These are the primary benefits of the 
proposed rule. Several commenters agreed that a Board rule governing 
HFCAA determinations can improve regulatory transparency and 
consistency and reduce regulatory uncertainty.
    The Board believes that the proposed rule's jurisdiction-wide 
determinations would yield additional benefits. In the Board's 
experience, when foreign authorities take a position that impairs the 
Board's oversight access, the position applies generally to all firms 
within the jurisdiction. Consequently, jurisdiction-wide determinations 
would provide an efficient, effective means of making Board 
determinations under the HFCAA.
    Jurisdiction-wide determinations would be beneficial even when a 
foreign authority limits the Board's ability to inspect or investigate 
certain types of issuer audit engagements. Typically, the foreign 
authority's position applies to any firm in the jurisdiction that 
performs that type of engagement. If the Board were unable to make 
jurisdiction-wide determinations and instead were required to single 
out for determination only the specific audit firms handling those 
issuer engagements at a particular time, those issuers potentially 
could evade the consequences of the HFCAA by routinely changing audit 
firms in response to each successive firm-specific determination issued 
by the Board.\120\ Beyond that, issuing a jurisdiction-wide 
determination in such a scenario would help ensure that foreign 
authorities cannot, in essence, choose which firms within their 
jurisdiction the Board may inspect or investigate.
---------------------------------------------------------------------------

    \120\ If the Board were to make only firm-by-firm determinations 
based on each firm's then-current client portfolio, the Board might 
need to establish a process requiring all registered firms to report 
auditor changes to the Board in real time so that the Board could 
monitor such changes and promptly make new determinations in 
response. Presently, the Board's rules require firms to report their 
issuer clients to the Board only after the firm's audit report on 
the issuer has been issued. See PCAOB Rule 3211(b), Auditor 
Reporting of Certain Audit Participants (Form AP must be filed 
within 35 days after the audit report is first included in a filing 
with the Commission, except that Form AP must be filed within 10 
days if the audit report is included in a registration statement 
under the Securities Act). One commenter noted that jurisdiction-
wide determinations would appear to be more efficient for the 
PCAOB's operations than determinations as to particular registered 
firms.
---------------------------------------------------------------------------

    Limiting jurisdiction-wide determinations to firms headquartered in 
the jurisdiction would generate its own benefits. It would reduce the 
risk that a jurisdiction-wide determination sweeps too broadly by 
encompassing firms that merely have a physical presence or personnel in 
the jurisdiction but are headquartered elsewhere. Although a position 
taken by a foreign authority can naturally be understood to impact 
registered firms headquartered in the jurisdiction, its impact on firms 
that are headquartered elsewhere can turn on many factors, including 
the extent of the firm's presence in the jurisdiction and the nature 
and extent of the audit work it performs there. With that in mind, the 
proposed rule provides that the Board could choose to make 
individualized determinations with respect to firms that are 
headquartered elsewhere but have an office in such a jurisdiction.
    Determinations as to a particular registered firm would complement 
the Board's jurisdiction-wide determinations by providing an additional 
option when the Board concludes that an across-the-board jurisdiction-
wide determination is not appropriate. Such a provision recognizes that 
although the Board generally expects to make jurisdiction-wide 
determinations, it cannot anticipate every scenario it might encounter 
in the future. If a position taken by a foreign authority applies 
solely to one firm, which is expected to happen infrequently, the 
Board's ability to make a determination as to that firm would be a 
critical tool for fulfilling the HFCAA's objectives. Additionally, by 
providing an avenue for the Board to make determinations as to 
registered firms that are headquartered in a cooperating jurisdiction 
but have an office in a noncooperating jurisdiction, this provision 
would help ensure that the Board's flexibility under the proposed rule 
matches its mandate under the HFCAA.
    The Board has also considered the potential benefits of making 
Board determinations public on its website. Such publication would 
inform investors, registered firms, issuers, audit committees, foreign 
authorities, and the public regarding Board determinations, thus 
promoting transparency and reducing regulatory uncertainty. Market 
participants may benefit from being informed of Board determinations 
promptly, rather than waiting for the Commission's identification of 
covered issuers.
Costs and Unintended Consequences
    The Board has also considered the potential costs and unintended 
consequences of the proposed rule. The Board expects any such costs and 
consequences to be limited, as the proposed rule merely establishes a 
framework for the Board to perform the responsibilities imposed upon it 
by the HFCAA.
    The Board has evaluated the potential costs and unintended 
consequences of making jurisdiction-wide determinations. As explained 
in Section C above, such determinations treat all registered firms 
headquartered in the jurisdiction alike when the positions taken by 
authorities in the jurisdiction apply equally to any firm performing 
the same audit work for issuers, whether or not a particular registered 
firm happens to be doing such work when the Board makes a 
determination. To mitigate any perceived overinclusiveness or 
underinclusiveness of a jurisdiction-wide determination, the proposed 
rule limits those determinations to registered firms headquartered in 
the jurisdiction, while also permitting the Board, when appropriate, to 
supplement a jurisdiction-wide determination with a determination as to 
a particular firm that has an office in the jurisdiction but is not 
headquartered there.\121\ This approach, in the Board's view, would be 
unlikely to impose incremental additional costs or lead to unintended 
consequences relative to the baseline, which consists of, among other 
things, the historical practice of identifying publicly the 
jurisdictions where there are unresolved obstacles to Board inspections 
and investigations.
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    \121\ Additionally, the Board has general residual exemption 
authority, subject to Commission approval, under Section 106(c) of 
the Act, and such authority could be used to address any potential 
overinclusiveness of a jurisdiction-wide determination.
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    The Board does not expect that the second central feature of the 
proposed rule--limiting jurisdiction-wide determinations to firms 
headquartered in the jurisdiction--would lead to

[[Page 53717]]

additional costs or unintended consequences.
    Related to the third central feature of the proposed rule--the 
Board's ability to make determinations as to particular firms with an 
office in a foreign jurisdiction--one commenter encouraged the Board to 
consider the potential adverse impact on competition when assessing a 
potential future determination, and further encouraged the Board to 
provide equivalent treatment to similarly-situated firms. While any 
future determinations under the proposed rule as to particular 
registered firms may potentially have an impact on competition, such 
determinations, as noted in Section C above, are expected to be 
infrequent. Moreover, the magnitude of any impact would depend on many 
factors, such as the number of firms within the jurisdiction, the size 
of the firm as to which the determination is made, and how the foreign 
authority's obstruction of the Board's inspections or investigations 
has already affected competition in the jurisdiction.
    Separately, the Board has evaluated the potential costs and 
unintended consequences of making its determinations public. The Board 
believes that the incremental costs of such publication will likely be 
minimal because similar information has historically been available on 
the Board's website for approximately a decade.\122\ Moreover, many 
issuers currently disclose in their annual reports the PCAOB's 
inability to inspect their auditor, as the Commission recently 
observed.\123\
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    \122\ See, e.g., Audit Reports Issued by PCAOB-Registered Firms 
in Jurisdictions where Authorities Deny Access to Conduct 
Inspections, available at https://pcaobus.org/over/international/denied-access-to-inspections.
    \123\ See SEC Exchange Act Release No. 91364, at 26 (noting ``a 
highly similar type and pattern of disclosure regarding the PCAOB's 
inability to inspect those firms included in the majority of the 
potential Commission-Identified Issuers' Item 3 (for Form 20-F 
filers) and Item 1A (for Form 10-K filers) discussion of risk 
factors'').
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Alternatives Considered
    As an alternative to a rulemaking, the Board considered issuing 
guidance related to its process or establishing a non-public process 
for making its determinations. The Board has determined, however, that 
a rule would reduce regulatory uncertainty for market participants by 
providing transparency and promoting consistency as to how the Board 
would perform its functions under the statute. Commenters generally 
agreed that a rule governing the Board's determination process would 
promote transparency and consistency and reduce regulatory uncertainty.
    The Board also considered whether the proposed rule should be 
limited to determinations as to particular registered firms. Without 
jurisdiction-wide determinations, however, the Board would have to make 
determinations only as to particular firms under subparagraph (a)(2) of 
the proposed rule, potentially based on the present composition of each 
firm's client portfolio. The Board believes that such an approach would 
incentivize an issuer whose audit engagement cannot be inspected or 
investigated by the Board to switch audit firms frequently, possibly 
frustrating the intent of the HFCAA and potentially necessitating a new 
process for real-time reporting of auditor changes to the Board so that 
Board determinations could be made or reassessed on a timely basis.
    The Board also considered whether to extend its jurisdiction-wide 
determinations to all firms that have an office in the jurisdiction, 
rather than only those headquartered there. The Board elected not to do 
so, based on its oversight experience, because the impact of a position 
taken by a foreign authority on a firm headquartered elsewhere can vary 
based on the particulars of the firm's presence, audit work, and issuer 
clients in the jurisdiction.
    When prescribing the grounds upon which a determination may rest, 
the Board considered whether the Board's commencement and subsequent 
inability to finish an inspection or investigation should be a 
prerequisite to a determination. The Board has not adopted that 
approach because the position taken by a foreign authority can 
frustrate the initiation of, or the ability to complete, an inspection 
or investigation. Moreover, commencing inspections or investigations in 
the face of such obstacles would be costly and fruitless, not only for 
the Board, but also for registered firms.
    Lastly, although it can exercise exemption authority under Section 
106(c) of the Act with the Commission's approval,\124\ the Board 
considered whether the proposed rule should include a procedure for the 
Board to grant exceptions from a jurisdiction-wide determination. The 
Board did not include such a mechanism in the proposed rule for five 
principal reasons:
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    \124\ See Section 106(c) of the Act (``[T]he Board, subject to 
the approval of the Commission, may, by rule, regulation, or order, 
and as [the Board] determines necessary or appropriate in the public 
interest or for the protection of investors, either unconditionally 
or upon specified terms and conditions exempt any foreign public 
accounting firm, or any class of such firms, from any provision of 
this Act or the rules of the Board . . . issued under this Act.'').
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     An exception procedure would be inconsistent with the 
rationale for jurisdiction-wide determinations, namely, that the 
foreign authority has taken a position of such general scope and 
application that it obstructs the Board's ability to complete 
inspections or investigations in that jurisdiction.
     To the extent that exception arguments would be based on 
the composition of a firm's client portfolio at a moment in time, 
entertaining such arguments would require speculation as to whether the 
foreign authority would impede the Board's ability to inspect or 
investigate those audits and would create a moving target as the firm 
gains and loses clients over time.
     Exceptions might increase the risk of a ``shell game.'' If 
a firm becomes subject to a Board determination because the Board 
cannot inspect certain types of issuer audit engagements it performed, 
those issuers might simply migrate to an excepted firm, triggering the 
need for the Board to monitor auditor changes constantly and then 
modify its determinations or revise its exceptions.
     An exception procedure might encourage foreign authorities 
to manipulate the determination process by cherry-picking certain firms 
that the PCAOB can inspect, thereby casting doubt on the justification 
for the Board's jurisdiction-wide determination.
     Allowing firms to seek exceptions could effectively 
transform the Board's jurisdiction-wide approach to a firm-by-firm 
approach that consumes substantial Board resources and fails to protect 
investors.
    One commenter indicated that the Board's existing exemption 
authority is adequate and expressed concern that granting exceptions 
could transform the Board's jurisdiction-wide approach into a firm-by-
firm approach that consumes substantial resources and fails to protect 
investors. The Board agrees with this commenter and has not created a 
procedure for granting exceptions from a jurisdiction-wide 
determination.

III. Date of Effectiveness of the Proposed Rule and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Board consents, the Commission will:

[[Page 53718]]

    (A) By order approve or disapprove such proposed rule; or
    (B) institute proceedings to determine whether the proposed rule 
should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
is consistent with the requirements of Title I of the Act. Comments may 
be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/pcaob.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. PCAOB-2021-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Vanessa Countryman, 
Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File No. PCAOB-2021-01. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's website (http://www.sec.gov/rules/pcaob.shtml). Copies 
of the submission, all subsequent amendments, all written statements 
with respect to the proposed rule that are filed with the Commission, 
and all written communications relating to the proposed rule between 
the Commission and any person, other than those that may be withheld 
from the public in accordance with the provisions of 5 U.S.C. 552, will 
be available for website viewing and printing in the Commission's 
Public Reference Room, 100 F Street NE, Washington, DC 20549-1090, on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filings will also be available for inspection and 
copying at the principal office of the PCAOB. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. All submissions should refer to 
File No. PCAOB-2021-01 and should be submitted on or before October 19, 
2021.
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    \125\ 17 CFR 200.30-11(b)(1) and (3).

    For the Commission, by the Office of the Chief Accountant, by 
delegated authority.\125\
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-21056 Filed 9-23-21; 4:15 pm]
BILLING CODE 8011-01-P