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SubscribeInvestor Bulletin – Opportunity To Comment on Proposal To Protect Investors From False or Misleading Statements About PCAOB Registration and Oversight
March 12, 2024
The Public Company Accounting Oversight Board’s (PCAOB or “the Board”) Office of the Investor Advocate is alerting investors to the opportunity to comment on the proposal regarding false or misleading statements concerning PCAOB registration and oversight.
This document represents the views of the PCAOB Office of the Investor Advocate and not necessarily those of other PCAOB staff or the Board. It is not a rule, policy, or statement of the Board.
On February 27, the Board issued for public comment a proposal to establish a new rule that would prohibit registered audit firms and associated persons from making false or misleading statements about PCAOB registration and oversight of the audit firm or its services in marketing materials or in other statements.
Public securities markets depend on audits to support reliable disclosure of financial information, and confidence in the market can be influenced by whether audits are subject to PCAOB oversight. The PCAOB has observed statements by registered firms that may cause confusion about PCAOB registration and oversight, for example by incorrectly implying PCAOB endorsement of a registered firm or by referring to the PCAOB in statements about work that the PCAOB does not oversee. The proposal seeks to protect investors and other members of the public from such false or misleading statements.
- Read the full proposal here.
The PCAOB currently lacks a rule governing how a registered firm or its associated persons may leverage the significance of PCAOB registration or oversight in marketing and other statements to clients, potential clients, or the public. The proposal would establish by PCAOB rule a general prohibition on making false or misleading statements about a firm’s registration status, including the extent of PCAOB oversight of a firm’s services. The proposal further provides certain specific types of statements that would be prohibited as false or misleading.
For example, under the proposal, references to the PCAOB or registration that imply that the PCAOB sponsors, recommends, or endorses the firm or its services would be prohibited. The PCAOB has observed firms touting PCAOB registration as a “seal of approval” of their services. The Board, however, does not sponsor, recommend, or endorse firms or their services. The proposal would protect investors as well as other members of the public from possible confusion caused by such mischaracterizations.
The proposal also addresses references to the PCAOB in marketing and other statements that imply PCAOB oversight of a registered firm’s work that the PCAOB does not oversee. While audits by registered accounting firms of issuers or SEC-registered broker-dealers are subject to PCAOB oversight, audits by registered firms of other types of entities and the firms’ other services are not. For example, a “proof-of-reserves attestation” for a cryptocurrency company, even if it is performed by a registered firm, is generally not subject to PCAOB inspection or enforcement activities. Statements about PCAOB registration as part of a proof-of-reserves attestation would be false or misleading unless they also disclosed that the PCAOB does not oversee that service. The proposal would address these and similar other statements where investors and the public may be misled.
Separately, the Board is also seeking comment on a provision that would allow the Board, in certain circumstances, to deem withdrawn the registration of an audit firm that repeatedly fails both to file annual reports and to pay annual fees. This aspect of the proposal would provide the PCAOB with an effective and efficient mechanism to withdraw from registration firms that may be defunct or that may have lost interest in maintaining their PCAOB registration.
How to Comment on the Proposal
The Board is seeking public comment – including from investors – on the proposal. Comments are due by April 12, 2024.
Comments can be sent by email (to [email protected]), by paper mail, or through the Board’s website.
The Office of the Investor Advocate encourages investors and others to submit comments on this Board proposal.
Tips, referrals, and other information from the public are important sources for PCAOB enforcement and inspections staff and can help identify violations of law or PCAOB rules and may be submitted HERE.