The U.S. Chamber of Commerce (“Chamber”) appreciates this opportunity to provide additional comments on the Public Company Accounting Oversight Board (“PCAOB” or “Board”) Exposure Draft on proposed Amendments to PCAOB Auditing Standards Related to a Company’s Noncompliance with Laws and Regulations (the “NOCLAR Proposal”). This correspondence supplements our letter to the Board dated August 2, 2023, and emphasize the need for thorough, objective economic analysis in PCAOB standard setting.
Over the past year, the Board has embarked on an ambitious standard-setting project, proposing new audit standards on a wide range of topics that will impact vast portions of the economy, not just in the United States, but anywhere firms under the Board’s oversight conduct audits under PCAOB auditing standards. Though the scope of this undertaking is colossal, the Chamber is concerned that the quality of the Board’s economic analysis in support of the myriad proposed standards has frequently fallen short. These shortcomings are particularly acute in the case of the NOCLAR Proposal.
We begin this letter by summarizing the standards for economic analysis that the Board has publicized on the PCAOB website for nearly a decade. Next, in the second part of this letter we discuss the statutory standards the Board and U.S. Securities and Exchange Commission (“SEC” or “Commission”) are required to satisfy when adopting new PCAOB audit standards. Third, we briefly survey some of the recent case law where courts have remanded SEC actions back to the SEC or vacated them entirely for various substantive and procedural deficiencies, particularly the failure to conduct a comprehensive and objective economic analysis. In the final part of the letter, we highlight the Supreme Court’s recent jurisprudence under the major questions doctrine and the Court’s reticence when regulators seek to impose substantial costs on the economy without clear Congressional authorization. In proposing the NOCLAR standards, the Board has not satisfied its obligations to conduct the requisite economic analysis.
Download the full letter here.
