On May 23, 2006 the Public Company Accounting Oversight Board (PCAOB) issued proposed rules for audit firm reporting to the PCAOB of certain events on an annual or special events basis, on the proposed new Forms described below. (Currently, Form 1 is the application to become a Registered Accounting Firm (registered with the PCAOB). The new forms would be:

• Form 2 - annual report by registered audit firms to PCAOB, to include such information as list of all audit engagements
• Form 3 - special events reporting - specified events to be reported by audit firm to the PCAOB within 14 days of their occurrence include, among 10 "triggering events," certain matters relating to status of audit firm, but also the following matters more directly related to actions of their clients:
  • audit report has been withdrawn by audit firm, and issuer has not reported that in accordance with SEC rules
  • audit firm has learned that an issuer has made use of the firm's name in a report containing the issuer's financial statements, without the consent of the audit firm, in circumstances where such consent is required or the issuer indicates that such consent was provided.
• Form 4 - succeeding to registration status of predecessor audit firm. The PCAOB acknowledges the importance of minimizing disruptions to issuer clients in terms of having an audit firm that retains registered status with the PCAOB in the event of certain changes in the audit firm outlined in the release and outlines some things necessary for firms to maintain that status.

Section 10A: One point on which PCAOB specifically seeks comment is the interaction of SEC Section 10A reporting by auditors regarding issuer's potential illegal acts, vis-à-vis PCAOB's desire to make certain information public that may not currently be public, in accordance with the bullets under Form 3 above regarding withdrawn audit reports and use of audit firms name without their consent.

There is a 60 day comment period on the proposed rules, ending July 24, 2006.

The proposed rules are available at:
• Periodic Reporting by Registered Accounting Firms [Annual Form 2; Special Event Reporting Form 3]
• Succeeding to the Registration Status of a Predecessor Firm [Form 4]:

Prepared May 31, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.org), Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion, unless specifically noted above