Public Company Accounting Oversight Board; Order Granting Approval of Proposed Rules To Implement the Reorganization of PCAOB Auditing Standards and Related Changes to PCAOB Rules and Attestation, Quality Control, and Ethics and Independence Standards, 57263-57265 [2015-24019]

Download as PDF Federal Register / Vol. 80, No. 183 / Tuesday, September 22, 2015 / Notices provisions of Section 6 of the Act,3 in general, and with Section 6(b)(4) and 6(b)(5) of the Act,4 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which NASDAQ operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange’s proposal to remove the references to NDX, not assess fees or surcharges for NDX or pay rebates for NDX is reasonable because the Exchange is seeking to delist this index from NOM on or before September 30, 2015. The Exchange’s proposal to remove the references to NDX, not assess fees or surcharges for NDX or pay rebates for NDX is equitable and not unfairly discriminatory because no market participant will be able to transact options in NDX as of the delisting. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange will delist NDX on or before September 30, 2015 and no longer offer market participants the opportunity to transact options in that index on NOM. The removal of references to NDX from the fee schedule does not impose an undue burden on competition because NOM Participants will not be able to transact options in NDX on NOM as of the delisting. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. tkelley on DSK3SPTVN1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.5 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in 3 15 U.S.C. 78f. U.S.C. 78f(b)(4) and (5). 5 15 U.S.C. 78s(b)(3)(A)(ii). 4 15 VerDate Sep<11>2014 17:39 Sep 21, 2015 Jkt 235001 57263 furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Brent J. Fields, Secretary. IV. Solicitation of Comments [FR Doc. 2015–23974 Filed 9–21–15; 8:45 am] BILLING CODE 8011–01–P Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2015–109 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2015–109. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2015–109 and should be submitted on or before October 13, 2015. PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75935; File No. PCAOB– 2015–01] Public Company Accounting Oversight Board; Order Granting Approval of Proposed Rules To Implement the Reorganization of PCAOB Auditing Standards and Related Changes to PCAOB Rules and Attestation, Quality Control, and Ethics and Independence Standards September 17, 2015. I. Introduction On June 17, 2015, the Public Company Accounting Oversight Board (the ‘‘Board’’ or the ‘‘PCAOB’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’), pursuant to section 107(b) 1 of the Sarbanes-Oxley Act of 2002 (the ‘‘Sarbanes-Oxley Act’’) and section 19(b) 2 of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), proposed rules to adopt amendments to implement the reorganization of PCAOB auditing standards and related changes to PCAOB rules and attestation, quality control, and ethics and independence standards (collectively, the ‘‘Proposed Rules’’ or ‘‘Proposed Reorganization’’).3 The Proposed Rules were published for comment in the Federal Register on June 25, 2015.4 At the time the notice was issued, the Commission designated a longer period to act on the Proposed Rules, until September 23, 2015.5 The Commission received four comment letters in response to the notice.6 This order approves the Proposed Rules. 6 17 CFR 200.30–3(a)(12). U.S.C. 7217(b). 2 15 U.S.C. 78s(b). 3 The Board originally proposed in March 2013 (‘‘Original Proposal’’) what became the Proposed Rules. See PCAOB Release No. 2013–002 (March, 26, 2013). The Board also issued a supplemental request for comment in May 2014 (‘‘Supplemental Request’’). See PCAOB Release No. 2014–001 (May 7, 2014). 4 See Release No. 34–75251 (June 19, 2015), 80 FR 36602 (June 25, 2015). 5 Ibid. 6 See Comment letters from Suzanne H. Shatto, June 27, 2015, Deloitte & Touche LLP, July 8, 2015, Michael McMurtry, July 28, 2015, and Stephen G. Wills, August 17, 2015, available at https:// 1 15 E:\FR\FM\22SEN1.SGM Continued 22SEN1 57264 Federal Register / Vol. 80, No. 183 / Tuesday, September 22, 2015 / Notices II. Description of the Proposed Rules In April 2003, the Board adopted, on an interim, transitional basis, generally accepted auditing standards (‘‘GAAS’’) that were in existence on April 16, 2003. When the Board adopted those auditing standards, it continued to use the topical organization and reference numbers (‘‘AU sections’’) in the Auditing Standards Board (‘‘ASB’’) of the American Institute of Certified Public Accountants’ (‘‘AICPA’’) thenexisting codification of its standards. Auditing standards issued by the Board (‘‘AS standards’’) have not been codified or otherwise organized by topic, and are numbered in sequential order based upon when they were issued. As a result, the Board’s auditing standards are organized using two separate numbering systems: (1) The numbering system used by the ASB when the Board adopted the interim standards; and (2) the numbering system used by the Board for the standards it has issued. tkelley on DSK3SPTVN1PROD with NOTICES 1. Proposed Reorganization Under the Proposed Reorganization, the individual standards will be grouped into the following topical categories: • General Auditing Standards (AS 1000s)—standards on broad auditing principles, concepts, activities, and communications; • Audit Procedures (AS 2000s)— standards for planning and performing audit procedures and for obtaining audit evidence; • Auditor Reporting (AS 3000s)— standards for auditors’ reports; • Matters Related to Filings Under Federal Securities Laws (AS 4000s)— standards on certain auditor responsibilities relating to U.S. Securities and Exchange Commission filings for securities offerings and reviews of interim financial information; and • Other Matters Associated with Audits (AS 6000s)—standards for other work performed in conjunction with an audit of an issuer or of a broker or dealer. Within each category are subcategories to further organize similar topics, such as standards related to auditor communications in the ‘‘General Auditing Standards’’ category. The integrated reference system uses an ‘‘AS’’ prefix to identify the auditing standard and each standard is assigned a unique section number, based on a four-digit numbering system. www.sec.gov/comments/pcaob-2015-01/pcaob 201501.shtml. VerDate Sep<11>2014 17:39 Sep 21, 2015 Jkt 235001 2. Changes to PCAOB Standards and Rules The amendments to PCAOB standards and rules include changes rescinding certain interim auditing standards that the Board believes are no longer necessary, eliminating inoperative language in auditing standards, references, and interpretations, and eliminating inoperative references to AICPA standards or rules. a. Changes to the PCAOB Standards The amendments primarily update section numbers, update crossreferences among standards using the numbering system in the adopted reorganization, and change the titles of certain standards. Other amendments rescind certain interim standards and remove or update certain terms and phrases in the standards. Interim Standards to be Rescinded The following interim standards are being rescinded because they contain requirements that have been superseded or duplicated by other PCAOB standards, and as such, are considered unnecessary: • AU sec. 150, Generally Accepted Auditing Standards • AU sec. 201, Nature of the General Standards • AU sec. 410, Adherence to Generally Accepted Accounting Principles • AU sec. 532, Restricting the Use of an Auditor’s Report • AU sec. 901, Public Warehouses— Controls and Auditing Procedures for Goods Held. Interpretive Publications Almost all 7 of the AICPA auditing interpretations are being retained and presented separately from the auditing standards. The Proposed Reorganization retains the existing requirement for the auditor to be aware of and consider the applicable auditing interpretations. The Proposed Reorganization retains the majority 8 of the appendices to the interim auditing standards and to continue presenting those appendices together with their related auditing standards in the same manner that appendices to PCAOB-issued standards are presented. Additionally, the Proposed Reorganization removes references to AICPA Audit and 7 The Proposed Reorganization will rescind two auditing interpretations related to AU sec. 410 and AU sec. 534 and interpretation 16 of AU sec. 508 because they are either duplicative or unrelated to the preparation or issuance of any audit report for an issuer, broker, or dealer, and thus unnecessary. 8 The Proposed Reorganization will delete duplicative and thus unnecessary appendices that contain paragraphs .86 and .87 of AU sec. 316. PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 Accounting Guides and AICPA auditing Statements of Position because the guides referenced in PCAOB standards are outdated.9 Other Changes to PCAOB Standards The Proposed Reorganization includes amendments to replace references to GAAS throughout the auditing standards with references to the standards of the PCAOB or PCAOB auditing standards, and accordingly, to supersede Auditing Standard No. 1 (‘‘AS 1’’), References in Auditors’ Reports to the Standards of the Public Company Accounting Oversight Board.10 The Proposed Reorganization also includes amendments to preserve the requirement from AS 1 for the auditor’s report to include the city and state, (or city and country), of the auditor. Finally, as AS 1 applied to the PCAOB’s attestation standards, amendments to update references to PCAOB standards and to include the city and state (or city and country) have been applied to the attestation standards. As a result of these changes, the amendments also include updates to the illustrative auditor’s reports included throughout the auditing standards. In addition to illustrating the two changes described above, the updates to the reports include changing the title to ‘‘Report of Independent Registered Public Accounting Firm.’’ 11 b. Changes to PCAOB Rules The Proposed Reorganization amends PCAOB Rule 3200T to remove (1) the reference to AU sec. 150, which, as discussed above, is rescinded, and (2) terms such as ‘‘interim auditing standards’’ and ‘‘generally accepted auditing standards.’’ These terms are no longer relevant under the Proposed Reorganization. Additionally, the Proposed Reorganization makes the rule permanent, rather than temporary, and therefore removes the word ‘‘Interim’’ from its title. 9 AICPA Audit and Accounting Guides and auditing Statements of Position referenced in PCAOB standards are the editions of those publications as in existence on April 16, 2003. 10 In 2004, the Commission published interpretive guidance to explain that references in Commission rules and staff guidance to GAAS or specific standards of GAAS, as they relate to issuers, should be understood to mean the standards of the PCAOB plus any applicable rules of the Commission. See Release No. 34–49708, FR– 73 (May 14, 2004). 11 In the Board’s final rule release, it notes that the amendments would not preclude an unregistered firm that applies PCAOB standards, when appropriate, from omitting ‘‘Registered’’ from the title of the report. See PCAOB Release No. 2015–002 at fn. 26 (March 31, 2015). E:\FR\FM\22SEN1.SGM 22SEN1 Federal Register / Vol. 80, No. 183 / Tuesday, September 22, 2015 / Notices 3. Applicability and Effective Date The PCAOB has proposed application of its Proposed Rules to audits of all issuers, including audits of emerging growth companies (‘‘EGCs’’),12 as discussed in section IV. below. The Proposed Rules also would apply to audits of SEC-registered brokers and dealers.13 The Proposed Rules would be effective as of December 31, 2016. However, auditors and others are not precluded from using and referencing the standards as reorganized pursuant to the Proposed Rules before the effective date because the amendments do not substantively change the standards’ requirements.14 tkelley on DSK3SPTVN1PROD with NOTICES III. Comment Letters As noted above, the Commission received four comment letters concerning the Proposed Rules. Three commenters expressed support for the Proposed Rules,15 and the other commenter provided suggestions discussed further below.16 One commenter stated that the new organizational structure will improve the usability of the PCAOB’s auditing standards, including helping users navigate the standards more easily.17 Another commenter suggested adopting a similar structure used by the ASB and IAASB and reorganizing the PCAOB’s attestation, quality control, and ethics and independence standards. This same commenter expressed concern regarding the rescission of AU sec. 532 and removal of references to nonauthoritative other guidance in the Proposed Reorganization.18 Finally, one commenter suggested enhancements to improve the usability of the Proposed Reorganization, including a suggestion to embed PCAOB standards in the FASB’s Accounting Standards Codification.19 The PCAOB addressed many of these comments in its Original Proposal, Supplemental Request, and final rule release. The Commission does 12 The term ‘‘emerging growth company’’ is defined in Section 3(a)(80) of the Exchange Act. 15 U.S.C. 78c(a)(80). 13 On July 30, 2013, the Commission adopted amendments to Rule 17a-5 under the Exchange Act to require, among other things, that audits of brokers’ and dealers’ financial statements be performed in accordance with the standards of the PCAOB for fiscal years ending on or after June 1, 2014. 17 CFR 240.17a-5. See Broker–Dealer Reports, Release No. 34–70073, (July 30, 2013), 78 FR 51910 (August 21, 2013), available at https://www.sec.gov/ rules/final/2013/34-70073.pdf. 14 See PCAOB Release No. 2015–002 at 21. 15 See Shatto Letter, Deloitte Letter and McMurtry Letter. 16 See Wills Letter. 17 See Deloitte Letter. 18 See McMurtry Letter. 19 See Wills Letter. VerDate Sep<11>2014 17:39 Sep 21, 2015 Jkt 235001 not find the PCAOB’s responses to be unreasonable. The comment on embedding PCAOB standards in the FASB’s Accounting Standards Codification is outside the scope of the Proposed Rules. IV. The PCAOB’s EGC Request Section 103(a)(3)(C) of the SarbanesOxley Act provides that any additional rules adopted by the PCAOB subsequent to April 5, 2012 do not apply to the audits of EGCs, unless the Commission determines that the application of such additional requirements is necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation.20 Having considered those factors, and as explained further herein, the Commission finds that applying the Proposed Rules to audits of EGCs is necessary or appropriate in the public interest. In proposing application of the Proposed Rules to audits of all issuers, including EGCs, the PCAOB requested that the Commission make the determination required by section 103(a)(3)(C). To assist the Commission in making its determination, the PCAOB prepared and submitted to the Commission its own EGC analysis. The PCAOB’s EGC analysis includes discussions of characteristics of selfidentified EGCs and economic considerations pertaining to audits of EGCs, including efficiency, competition, and capital formation. In its analysis, the Board states the reorganization of PCAOB auditing standards would involve amendments that do not impose additional requirements on auditors or change substantively the requirements of PCAOB standards. Thus, the reorganization, including the amendments, is not expected to affect the manner in which audits are performed and reported under PCAOB standards, including audits of EGCs. Additionally, reorganizing the PCAOB standards into a single, integrated organizational structure should make it easier for auditors and others to navigate, use, and apply the standards. The PCAOB’s EGC analysis was included in the Commission’s public notice soliciting comment on the Proposed Rules. Based on the analysis submitted, we believe the information in the record is sufficient for the Commission to make the requested EGC determination in relation to the Proposed Rules. 20 Section 103(a)(3)(C) of the Sarbanes-Oxley Act, as amended by section 104 of the JOBS Act. PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 57265 V. Conclusion The Commission has carefully reviewed and considered the Proposed Rules and the information submitted therewith by the PCAOB, including the PCAOB’s EGC analysis, and the comment letters received. In connection with the PCAOB’s filing and the Commission’s review, A. The Commission finds that the Proposed Rules are consistent with the requirements of the Sarbanes-Oxley Act and the securities laws and are necessary or appropriate in the public interest or for the protection of investors; and B. Separately, the Commission finds that the application of the Proposed Rules to EGC audits is necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation. It is therefore ordered, pursuant to section 107 of the Sarbanes-Oxley Act and section 19(b)(2) of the Exchange Act, that the Proposed Rules (File No. PCAOB–2015–01) be and hereby are approved. By the Commission. Brent J. Fields, Secretary. [FR Doc. 2015–24019 Filed 9–21–15; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #14467 and #14468] Colorado Disaster #CO–00073 U.S. Small Business Administration. ACTION: Notice. AGENCY: This is a notice of an Administrative declaration of a disaster for the State of Colorado dated 09/16/ 2015. Incident: Landslides. Incident Period: 04/24/2015 and continuing. Effective Date: 09/16/2015. Physical Loan Application Deadline Date: 11/16/2015. Economic Injury (EIDL) LOAN Application Deadline Date: 06/16/2016. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing And Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416. SUMMARY: E:\FR\FM\22SEN1.SGM 22SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 183 (Tuesday, September 22, 2015)]
[Notices]
[Pages 57263-57265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24019]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75935; File No. PCAOB-2015-01]

Public Company Accounting Oversight Board; Order Granting
Approval of Proposed Rules To Implement the Reorganization of PCAOB
Auditing Standards and Related Changes to PCAOB Rules and Attestation,
Quality Control, and Ethics and Independence Standards

September 17, 2015.

I. Introduction

On June 17, 2015, the Public Company Accounting Oversight Board
(the ``Board'' or the ``PCAOB'') filed with the Securities and Exchange
Commission (the ``Commission''), pursuant to section 107(b) \1\ of the
Sarbanes-Oxley Act of 2002 (the ``Sarbanes-Oxley Act'') and section
19(b) \2\ of the Securities Exchange Act of 1934 (the ``Exchange
Act''), proposed rules to adopt amendments to implement the
reorganization of PCAOB auditing standards and related changes to PCAOB
rules and attestation, quality control, and ethics and independence
standards (collectively, the ``Proposed Rules'' or ``Proposed
Reorganization'').\3\ The Proposed Rules were published for comment in
the Federal Register on June 25, 2015.\4\ At the time the notice was
issued, the Commission designated a longer period to act on the
Proposed Rules, until September 23, 2015.\5\ The Commission received
four comment letters in response to the notice.\6\ This order approves
the Proposed Rules.
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\1\ 15 U.S.C. 7217(b).
\2\ 15 U.S.C. 78s(b).
\3\ The Board originally proposed in March 2013 (``Original
Proposal'') what became the Proposed Rules. See PCAOB Release No.
2013-002 (March, 26, 2013). The Board also issued a supplemental
request for comment in May 2014 (``Supplemental Request''). See
PCAOB Release No. 2014-001 (May 7, 2014).
\4\ See Release No. 34-75251 (June 19, 2015), 80 FR 36602 (June
25, 2015).
\5\ Ibid.
\6\ See Comment letters from Suzanne H. Shatto, June 27, 2015,
Deloitte & Touche LLP, July 8, 2015, Michael McMurtry, July 28,
2015, and Stephen G. Wills, August 17, 2015, available at https://www.sec.gov/comments/pcaob-2015-01/pcaob201501.shtml.

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[[Page 57264]]

II. Description of the Proposed Rules

In April 2003, the Board adopted, on an interim, transitional
basis, generally accepted auditing standards (``GAAS'') that were in
existence on April 16, 2003. When the Board adopted those auditing
standards, it continued to use the topical organization and reference
numbers (``AU sections'') in the Auditing Standards Board (``ASB'') of
the American Institute of Certified Public Accountants' (``AICPA'')
then-existing codification of its standards. Auditing standards issued
by the Board (``AS standards'') have not been codified or otherwise
organized by topic, and are numbered in sequential order based upon
when they were issued. As a result, the Board's auditing standards are
organized using two separate numbering systems: (1) The numbering
system used by the ASB when the Board adopted the interim standards;
and (2) the numbering system used by the Board for the standards it has
issued.

1. Proposed Reorganization

Under the Proposed Reorganization, the individual standards will be
grouped into the following topical categories:
General Auditing Standards (AS 1000s)--standards on broad
auditing principles, concepts, activities, and communications;
Audit Procedures (AS 2000s)--standards for planning and
performing audit procedures and for obtaining audit evidence;
Auditor Reporting (AS 3000s)--standards for auditors'
reports;
Matters Related to Filings Under Federal Securities Laws
(AS 4000s)--standards on certain auditor responsibilities relating to
U.S. Securities and Exchange Commission filings for securities
offerings and reviews of interim financial information; and
Other Matters Associated with Audits (AS 6000s)--standards
for other work performed in conjunction with an audit of an issuer or
of a broker or dealer.
Within each category are subcategories to further organize similar
topics, such as standards related to auditor communications in the
``General Auditing Standards'' category. The integrated reference
system uses an ``AS'' prefix to identify the auditing standard and each
standard is assigned a unique section number, based on a four-digit
numbering system.

2. Changes to PCAOB Standards and Rules

The amendments to PCAOB standards and rules include changes
rescinding certain interim auditing standards that the Board believes
are no longer necessary, eliminating inoperative language in auditing
standards, references, and interpretations, and eliminating inoperative
references to AICPA standards or rules.
a. Changes to the PCAOB Standards
The amendments primarily update section numbers, update cross-
references among standards using the numbering system in the adopted
reorganization, and change the titles of certain standards. Other
amendments rescind certain interim standards and remove or update
certain terms and phrases in the standards.
Interim Standards to be Rescinded
The following interim standards are being rescinded because they
contain requirements that have been superseded or duplicated by other
PCAOB standards, and as such, are considered unnecessary:

AU sec. 150, Generally Accepted Auditing Standards
AU sec. 201, Nature of the General Standards
AU sec. 410, Adherence to Generally Accepted Accounting
Principles
AU sec. 532, Restricting the Use of an Auditor's Report
AU sec. 901, Public Warehouses--Controls and Auditing
Procedures for Goods Held.
Interpretive Publications
Almost all \7\ of the AICPA auditing interpretations are being
retained and presented separately from the auditing standards. The
Proposed Reorganization retains the existing requirement for the
auditor to be aware of and consider the applicable auditing
interpretations.
---------------------------------------------------------------------------

\7\ The Proposed Reorganization will rescind two auditing
interpretations related to AU sec. 410 and AU sec. 534 and
interpretation 16 of AU sec. 508 because they are either duplicative
or unrelated to the preparation or issuance of any audit report for
an issuer, broker, or dealer, and thus unnecessary.
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The Proposed Reorganization retains the majority \8\ of the
appendices to the interim auditing standards and to continue presenting
those appendices together with their related auditing standards in the
same manner that appendices to PCAOB-issued standards are presented.
Additionally, the Proposed Reorganization removes references to AICPA
Audit and Accounting Guides and AICPA auditing Statements of Position
because the guides referenced in PCAOB standards are outdated.\9\
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\8\ The Proposed Reorganization will delete duplicative and thus
unnecessary appendices that contain paragraphs .86 and .87 of AU
sec. 316.
\9\ AICPA Audit and Accounting Guides and auditing Statements of
Position referenced in PCAOB standards are the editions of those
publications as in existence on April 16, 2003.
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Other Changes to PCAOB Standards
The Proposed Reorganization includes amendments to replace
references to GAAS throughout the auditing standards with references to
the standards of the PCAOB or PCAOB auditing standards, and
accordingly, to supersede Auditing Standard No. 1 (``AS 1''),
References in Auditors' Reports to the Standards of the Public Company
Accounting Oversight Board.\10\ The Proposed Reorganization also
includes amendments to preserve the requirement from AS 1 for the
auditor's report to include the city and state, (or city and country),
of the auditor. Finally, as AS 1 applied to the PCAOB's attestation
standards, amendments to update references to PCAOB standards and to
include the city and state (or city and country) have been applied to
the attestation standards.
---------------------------------------------------------------------------

\10\ In 2004, the Commission published interpretive guidance to
explain that references in Commission rules and staff guidance to
GAAS or specific standards of GAAS, as they relate to issuers,
should be understood to mean the standards of the PCAOB plus any
applicable rules of the Commission. See Release No. 34-49708, FR-73
(May 14, 2004).
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As a result of these changes, the amendments also include updates
to the illustrative auditor's reports included throughout the auditing
standards. In addition to illustrating the two changes described above,
the updates to the reports include changing the title to ``Report of
Independent Registered Public Accounting Firm.'' \11\
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\11\ In the Board's final rule release, it notes that the
amendments would not preclude an unregistered firm that applies
PCAOB standards, when appropriate, from omitting ``Registered'' from
the title of the report. See PCAOB Release No. 2015-002 at fn. 26
(March 31, 2015).
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b. Changes to PCAOB Rules
The Proposed Reorganization amends PCAOB Rule 3200T to remove (1)
the reference to AU sec. 150, which, as discussed above, is rescinded,
and (2) terms such as ``interim auditing standards'' and ``generally
accepted auditing standards.'' These terms are no longer relevant under
the Proposed Reorganization. Additionally, the Proposed Reorganization
makes the rule permanent, rather than temporary, and therefore removes
the word ``Interim'' from its title.

[[Page 57265]]

3. Applicability and Effective Date

The PCAOB has proposed application of its Proposed Rules to audits
of all issuers, including audits of emerging growth companies
(``EGCs''),\12\ as discussed in section IV. below. The Proposed Rules
also would apply to audits of SEC-registered brokers and dealers.\13\
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\12\ The term ``emerging growth company'' is defined in Section
3(a)(80) of the Exchange Act. 15 U.S.C. 78c(a)(80).
\13\ On July 30, 2013, the Commission adopted amendments to Rule
17a-5 under the Exchange Act to require, among other things, that
audits of brokers' and dealers' financial statements be performed in
accordance with the standards of the PCAOB for fiscal years ending
on or after June 1, 2014. 17 CFR 240.17a-5. See Broker-Dealer
Reports, Release No. 34-70073, (July 30, 2013), 78 FR 51910 (August
21, 2013), available at https://www.sec.gov/rules/final/2013/34-70073.pdf.
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The Proposed Rules would be effective as of December 31, 2016.
However, auditors and others are not precluded from using and
referencing the standards as reorganized pursuant to the Proposed Rules
before the effective date because the amendments do not substantively
change the standards' requirements.\14\
---------------------------------------------------------------------------

\14\ See PCAOB Release No. 2015-002 at 21.
---------------------------------------------------------------------------

III. Comment Letters

As noted above, the Commission received four comment letters
concerning the Proposed Rules. Three commenters expressed support for
the Proposed Rules,\15\ and the other commenter provided suggestions
discussed further below.\16\
---------------------------------------------------------------------------

\15\ See Shatto Letter, Deloitte Letter and McMurtry Letter.
\16\ See Wills Letter.
---------------------------------------------------------------------------

One commenter stated that the new organizational structure will
improve the usability of the PCAOB's auditing standards, including
helping users navigate the standards more easily.\17\ Another commenter
suggested adopting a similar structure used by the ASB and IAASB and
reorganizing the PCAOB's attestation, quality control, and ethics and
independence standards. This same commenter expressed concern regarding
the rescission of AU sec. 532 and removal of references to non-
authoritative other guidance in the Proposed Reorganization.\18\
Finally, one commenter suggested enhancements to improve the usability
of the Proposed Reorganization, including a suggestion to embed PCAOB
standards in the FASB's Accounting Standards Codification.\19\ The
PCAOB addressed many of these comments in its Original Proposal,
Supplemental Request, and final rule release. The Commission does not
find the PCAOB's responses to be unreasonable. The comment on embedding
PCAOB standards in the FASB's Accounting Standards Codification is
outside the scope of the Proposed Rules.
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\17\ See Deloitte Letter.
\18\ See McMurtry Letter.
\19\ See Wills Letter.
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IV. The PCAOB's EGC Request

Section 103(a)(3)(C) of the Sarbanes-Oxley Act provides that any
additional rules adopted by the PCAOB subsequent to April 5, 2012 do
not apply to the audits of EGCs, unless the Commission determines that
the application of such additional requirements is necessary or
appropriate in the public interest, after considering the protection of
investors and whether the action will promote efficiency, competition,
and capital formation.\20\ Having considered those factors, and as
explained further herein, the Commission finds that applying the
Proposed Rules to audits of EGCs is necessary or appropriate in the
public interest.
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\20\ Section 103(a)(3)(C) of the Sarbanes-Oxley Act, as amended
by section 104 of the JOBS Act.
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In proposing application of the Proposed Rules to audits of all
issuers, including EGCs, the PCAOB requested that the Commission make
the determination required by section 103(a)(3)(C). To assist the
Commission in making its determination, the PCAOB prepared and
submitted to the Commission its own EGC analysis. The PCAOB's EGC
analysis includes discussions of characteristics of self-identified
EGCs and economic considerations pertaining to audits of EGCs,
including efficiency, competition, and capital formation. In its
analysis, the Board states the reorganization of PCAOB auditing
standards would involve amendments that do not impose additional
requirements on auditors or change substantively the requirements of
PCAOB standards. Thus, the reorganization, including the amendments, is
not expected to affect the manner in which audits are performed and
reported under PCAOB standards, including audits of EGCs. Additionally,
reorganizing the PCAOB standards into a single, integrated
organizational structure should make it easier for auditors and others
to navigate, use, and apply the standards.
The PCAOB's EGC analysis was included in the Commission's public
notice soliciting comment on the Proposed Rules. Based on the analysis
submitted, we believe the information in the record is sufficient for
the Commission to make the requested EGC determination in relation to
the Proposed Rules.

V. Conclusion

The Commission has carefully reviewed and considered the Proposed
Rules and the information submitted therewith by the PCAOB, including
the PCAOB's EGC analysis, and the comment letters received. In
connection with the PCAOB's filing and the Commission's review,
A. The Commission finds that the Proposed Rules are consistent with
the requirements of the Sarbanes-Oxley Act and the securities laws and
are necessary or appropriate in the public interest or for the
protection of investors; and
B. Separately, the Commission finds that the application of the
Proposed Rules to EGC audits is necessary or appropriate in the public
interest, after considering the protection of investors and whether the
action will promote efficiency, competition, and capital formation.
It is therefore ordered, pursuant to section 107 of the Sarbanes-
Oxley Act and section 19(b)(2) of the Exchange Act, that the Proposed
Rules (File No. PCAOB-2015-01) be and hereby are approved.

By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015-24019 Filed 9-21-15; 8:45 am]
BILLING CODE 8011-01-P

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