Dear Ms. Brown:
The U.S. Chamber of Commerce (“Chamber”) Center for Capital Markets Competitiveness appreciates the opportunity to comment on the Public Company Accounting Oversight Board (“PCAOB” or “Board”) Exposure Draft on Proposals Regarding False or Misleading Statements Concerning PCAOB Registration and Oversight and Constructive Requests to Withdraw from Registration(the “Proposal”).
The Proposal involves a new rule, Rule 2400,[1] with a general prohibition on false or misleading statements concerning a firm’s PCAOB registration status – including the extent of the PCAOB’s oversight of the firm – when marketing or otherwise holding out the firm to clients, potential clients, or the public; a non-exclusive set of circumstances that violate the general prohibition; and a provision to allow the Board to consider any prior false or misleading statements when reviewing applications for registration.[2] The non-exclusive set of circumstances that would violate the general provision pertain to endorsements; statements by registered firms not currently subject to PCAOB oversight; and statements in conjunction with services not subject to PCAOB oversight in auditors’ reports for clients other than issuers or broker-dealers and when withdrawal requests are pending.
While the Proposal is characterized as providing “practical solutions to some practical problems” regarding PCAOB registration and oversight,[3] the Proposal is also part of the Board’s goal to strengthen PCAOB enforcement.[4] Consistent with this goal, the Proposal emphasizes that violations of the general provision would provide a basis for PCAOB inspection findings and, where appropriate, enforcement actions.[5]
Given these objectives and its broad sweep, proposed Rule 2400 raises issues of intent and consequences that the Chamber strongly encourages the Board to consider. We discuss these matters below, along with some additional issues related to economic analysis.
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[1] To complement proposed Rule 2400, the Proposal also includes an amendment to PCAOB Form 3, Special Reporting Form, to require a registered firm to notify the PCAOB within thirty days of the first time it issues an audit report for an issuer or broker-dealer (or plays a substantial role with respect to such an audit) if it has not issued an audit report (or played a substantial role) for three years or more.
[2] The Proposal also amends PCAOB Rule 2107, Withdrawal from Registration, whereby the failure to file annual reports and pay annual fees for at least two consecutive reporting years would be considered a constructive request for withdrawal from registration.
[3] See Statement on Preventing False or Misleading Statements Concerning PCAOB Registration and Oversight, and Constructive Requests to Withdraw from Registration by Board Member Kara M. Stein (February 27, 2024).
[4] See the PCAOBStrategic Plan 2022-2026, page 13.
[5] See the Proposal, page 11.
