SEC publishes proposed rules on auditor reporting

June 15th, 2009

Finally, the SEC has published proposed rules on auditor reporting. These rules are one of the reforms required by the Sarbanes-Oxley Act of 2002. Recent events, such as the charges against Madoff’s auditors and life-threatening lawsuits against accounting firms, have emphasized the need for reforms that provide more transparency about audit firms.

If the rule-making action is eventually approved by the SEC, this decision would put into effect a series of rules adopted by the PCAOB a year ago in June 2008. These rules would require that firms registered with the PCAOB file annual reports containing certain required disclosures and that the firms issue special reports when certain events occur.

  • Annual reporting. The annual reports would be required by June 30th of each year for the year ended March 31st of that year. The reports would include information about audits of issuers subject to SEC reporting, such as reports issued in the past year, disciplinary actions and fees.
  • Special reporting. Audit firms would need to file special reports within 30 days after the occurrence of certain events, such as a change in the firm’s name or ownership structure or certain administrative, legal or disciplinary proceedings.

Both the annual and special reports would be made available to the public on the PCAOB’s website, subject to certain exceptions for information for which a firm requests confidential treatment.

At this point, the earliest the requirements could take effect is June 30, 2010. But some firms are already issuing annual reports on a strictly voluntary basis, and additional reforms are possible following recommendations in the final report of the US Treasury Advisory Committee on the Auditing Profession.

The Advisory Committee, also known as the Paulson Committee, suggested that the PCAOB should require the largest audit firms to prepare and privately submit audited financials adhering to Generally Accepted Accounting Principles to the PCAOB by 2011. This would help guide the PCAOB’s decisions about inspections and registrations.  

Comments on the SEC’s proposal are requested by July 20, 2009. The full release is available at

Copyright © 2009 Center for Financial and Accounting Literacy




Entry Filed under: Governance

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