On 2 January 2025, Gary Gensler, Chair of the United States Securities and Exchange Commission (US SEC), gave an official statement announcing a rule change approved by the US SEC. The new regulation, proposed by the Public Company Accounting Oversight Board (PCAOB), mandates the withdrawal of registration for accounting firms that fail to meet basic compliance requirements for two consecutive years. This move aims to maintain the integrity of the PCAOB’s registry and ensure public confidence in the oversight of accounting firms.
The new rule targets firms that have not filed annual reports on Form 2 or paid annual fees for two years in succession. Under the new rule, such firms will automatically enter a formal withdrawal process, effectively curbing their ability to present themselves as registered entities with the PCAOB. Gary Gensler discussed the importance of this measure, noting that it ensures inactive or non-operational firms do not mislead stakeholders or diminish the credibility of the PCAOB’s public records.
The PCAOB safeguards the accuracy of financial reporting for public companies, and this new standard represents a significant effort to address a gap in its regulatory framework. Among the 1,544 firms currently registered, 80 firms have failed to comply with these basic obligations for both 2022 and 2023. None of these firms have issued an audit report for any public company issuer between 1 January 2021 and 31 August 2024. This lack of activity suggests these firms are either defunct or no longer operational, necessitating their removal from the PCAOB’s registry. The rule incorporates a 60-day grace period during which firms may notify the PCAOB of their intent to remain registered and resolve any outstanding compliance issues.
This decision follows years of review, with the PCAOB identifying persistent non-compliance among certain firms. Chair Gensler’s announcement signals the culmination of these efforts, with the rule now in effect as of January 2025. Affected firms have 60 days to take corrective action, after which the withdrawal process will be finalised, marking a decisive resolution to this regulatory challenge.
Chair Gary Gensler acknowledged the contributions of PCAOB staff and US SEC colleagues across multiple divisions, including the Office of the Chief Accountant, the Division of Economic and Risk Analysis, and the Division of Enforcement, among others. By removing inactive firms from its registry, the PCAOB aims to enhances transparency and safeguard public trust.
(Source: https://www.sec.gov/newsroom/speeches-statements/gensler-pcaob-withdrawal-registration-010225)
