PCAOB Begins Mailing Out Bills

August 5, 2003 (PLANSPONSOR.com) - The Public Company Accounting Oversight Board (PCAOB) has begun sending out the bills to 8,500 publicly traded companies, investment companies and other equity issuers that are required to fund it under the Sarbanes-Oxley Act.

Overall, approximately, 5,200 publicly traded companies and about 3,300 investment companies will receive invoices for the accounting support fees due the PCAOB.   This is after the US Securities and Exchange Commission (SEC) last week approved the PCAOB’s rules for allocation, assessment, and collection of the accounting support fees, according to a news release.

Under the Sarbanes-Oxley Act and the PCAOB’s rules, the annual accounting support fees are based on the average monthly US equity market capitalization of publicly traded companies, investment companies and other equity issuers.   The PCAOB said that the fees will be paid by publicly traded companies with average monthly capitalizations of more than $25 million each. Similarly, the assessment of fees will be limited to investment companies with average monthly net asset value or US equity market capitalization of more than $250 million each.

The burden though will clearly be placed on the shoulders of the larger companies.   It is expected that about 62% of issuers will pay $1,000 or less in accounting support fees to the PCAOB, with the largest 1,000 issuers expected to pay about 87% of the total fees due. Breaking it down further, publicly traded companies will together pay about 96% of the total fees due, with about 3.5% being collected from open-end mutual funds, and the remainder will be collected from other investment companies.

“The bulk of our accounting support fees are assessed against the largest equity issuers,” said PCAOB Chairman William J McDonough, in a statement. “Small companies need not be concerned about increased costs while they and their shareholders benefit from the PCAOB’s attention to the quality of audits.”

Under the Sarbanes-Oxley Act, companies have little choice but to pay. If they do not pay within 30 days, interest at 6% will be assessed, and eventually the SEC could take action against any company that does not pay. Moreover, a company that has not paid cannot under the law receive an unqualified audit opinion from its auditor.

Also being sent out, albeit via separate notices, are bills for the funding of the Financial Accounting Standards Board (FASB).    The FASB bills though are going to companies with market capitalizations above $32.2 million.   Previously, the Connecticut-based FASB relied heavily on voluntary contributions to fund its operations, but the new funding is scheduled to come courtesy of a new system put into place by the implementation of the Sarbanes-Oxley Act.