The Public Company Accounting Oversight Board on Tuesday approved a new rule that will allow accounting firms to keep their registered status after a merger or change of name.
The rule—and the accompanying form—spells out the circumstances where a firm can keep its registration status even if it becomes a new “legal entity.” First proposed in May 2006, the new rule is intended to protect auditors from having to stop their work because of a gap in their registration status.
“Today’s action will allow for registered firms—in appropriate and well defined circumstances—to provide audit services without a break in their PCAOB registration status when there has been some change in their legal form,” PCAOB Chairman Mark Olson said. “The rules would provide flexibility that is important given the serious implications of a firm operating without registration.”
The circumstances include any changes in a firm’s legal organization or the jurisdiction in which it’s organized. A registered firm can also continue operating if it acquires or combines with an unregistered firm to form a new company.
“An issuer’s compliance with federal law and regulations depends upon its auditor being registered,according to the proposal, which added that “disruption of a firm’s registration should not be taken lightly.”
The PCAOB unanimously approved the new rule, which will be submitted to the Securities and Exchange Commission for final approval.