Dive Brief:

• The Securities and Exchange Commission gave the watchdog for the auditors of public companies more leeway in de-registering accounting firms that for two straight years fail to file annual reports and pay annual fees.
• The new rule under the Public Company Accounting Oversight Board partly aims at ensuring that non-compliant accounting firms do not market themselves as PCAOB registrants, SEC Chair Gary Gensler said Thursday in a statement. Eighty firms failed to file annual reports and pay annual fees in 2022 and 2023, he said.
• “If a firm isn’t filing statutory annual reports or paying their dues, it’s logical to presume the firm is inactive,” Gensler said. “It’s appropriate not to let such firms market themselves to the public as being registered with the PCAOB.”

Dive Insight:

The new rule will apply to annual reports and fees due this year, and could trigger withdrawal of PCAOB registrations beginning in the fall of 2026, the SEC said in an announcement of its approval.

The standard includes a 60-day waiting period before finalizing withdrawal, giving accounting firms time to notify the PCAOB of their intent to remain registered.

Under the current rule, the PCAOB can only de-register accounting firms that are subject to disciplinary sanction or that request withdrawal from registration.

The new standard will enable the PCAOB to remove from registration firms that no longer exist, are non-operational and that “have demonstrated through inaction that they no longer wish to remain registered,” Gensler said. Currently, 1,544 accounting firms are registered with the PCAOB.

“The presence of continuously delinquent firms on the PCAOB’s list of registered firms hinders several regulatory objectives, including its ability to maintain an accurate public record of registered public accounting firms in operation and that wish to remain registered; to ensure that the information required on annual reports is being reported to the public and the PCAOB; to collect mandatory annual fees; and to efficiently use PCAOB staff time and resources,” the SEC said.

Deloitte backed the new rule in a Dec. 12 letter to the SEC, noting that the standard will create “a more accurate public record of registered public accounting firms that wish to remain registered.”

Despite requirements under the Sarbane-Oxley Act of 2002 — as well as reminders from the PCAOB — more than 50 accounting firms have failed to meet requirements for registration for at least six consecutive years, the SEC said.

The new rule “will not only make PCAOB registration information more useful for investors, audit committees and other stakeholders, it will also help our organization use its staff time and resources more efficiently and effectively,” PCAOB Chair Erica Williams said in a statement.