CPAs have pressed the U.S. Audit Commission to scale back a proposal aimed at preventing companies from misrepresenting their registration with the regulator as an endorsement of their practice.
Draft rules released by the Public Company Accounting Oversight Board in February set the bar for enforcement action too low, exposing companies to greater legal liability, auditors and accounting organizations said on April 15. In the feedback submitted to the regulator, it stated: According to some comment letters, there is a clear case for companies to promote registration with the PCAOB as a stamp of approval.
PwC LLP, also known as PricewaterhouseCoopers, wrote in a letter to the audit committee that “this rule does not apply to unintentional conduct by a registered public accounting firm or its affiliates in making statements of fact. It shouldn't be done.” This letter was one of his 18 submissions regarding marketing proposals.
For auditors of virtual currency companies in particular, the line is blurring between regulated services for listed companies and reserve inspection services that scrutinize whether crypto assets exist on the blockchain and are backed by collateral. has become the subject of strict surveillance. The PCAOB stated that if a company emphasizes board registration in its reserve certification report, it is misleading investors unless the board clearly states that it does not oversee such services.
Almost half of companies registered with regulators do not actively audit listed companies or securities dealers and are not subject to regular board inspections. The board's proposal aims to end the practice of companies permanently registering with the board and advertising that connection to potential customers.
But even companies that are board-inspected and actively audit companies and broker-dealers have incomplete inspection records, according to the CPA Club, which provides subscription-based staffing services to U.S. audit firms. Despite this, the company is promoting registration with the board of directors as a sign of quality.
To combat misleading marketing, the board should impose stiffer fines for those who violate the rules, the CPA Club said. Staffing companies also urged boards to promote greater transparency and require companies to link to their PCAOB profile pages and post summaries of their inspection results on their websites.
regulatory conflict
Grant Thornton LLP and KPMG LLP asked boards to modify how companies address in their audit reports whether their practices are subject to PCAOB inspections. The companies also believe that the proposal will comply with other regulations, such as Securities and Exchange Commission rules, to reduce investor confusion when a company provides services under PCAOB standards but is outside the scope of board oversight. asked the board to address how this would align with regulatory requirements.
Based on board standards, auditors audit companies that plan to go public by merging with blank check companies, for example, or draft registration statements that have not yet been published. These audits and other services are outside the narrow scope of the board of directors.
In separate letters to the PCAOB, the Illinois Institute of CPAs and the U.S. Chamber of Commerce said the proposal was “too broad” in scope.
“Rulemaking and enforcement is not a substitute for stakeholder knowledge or oversight of the accounting firm market or the relevant PCAOB,” the Illinois association wrote, noting that the proposed rule may not achieve its intended goals. I warned you that there is. It could “create unreasonable costs and impacts on accounting firms.”
The Council of Institutional Investors also called on the Board to educate investors and the public about registration and enforcement operations.
The state's accounting regulator is backing a proposal to automatically deregister companies that fail to pay registration fees or file annual reports with the board of directors for two consecutive years. The National Association of State Boards of Accountancy is also pushing for stricter compliance, saying that boards should deregister companies after just one year or if the company doesn't pay fees or file an annual report. He said that.
