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US regulator endorses plans for audit firm annual reports

Registered US audit firms will be required to produce publicly available annual reports and routinely reveal details on legal proceedings, administration changes and other important events, according to new Public Company Accounting Oversight Board (PCAOB) rules.

The reporting requirements were passed by national regulator Securities Exchange Commission (SEC) in an attempt to improve the transparency of firms.

In the EU, firms are required to produce transparency reports, which provide details about how much a firm earns each year, its clients and personnel details.

The first set of US rules will come into effect on 12 October 2009. These relate to PCAOB Form 3 reports, which cover issues from administrative matters, such as changes in a firm's contact information to more substantive matters, including certain types of legal proceedings against a firm or its personnel. Form 3 reports must be produced within 30 days of an event occurring.

Firms will also have to produce annual reports, with the first of these due 30 June 2010.

All firms that are registered with the PCAOB as of 31 March of a particular year must, by 30 June of that year, file an annual report covering the 12-month period ending 31 March.

Annual reports will contain information on audit reports issued, disciplinary histories of new personnel, and information on fees billed to issuer audit clients for various categories of services.

“Adoption of these rules will put into effect an important provision of the Sarbanes-Oxley Act and increase transparency regarding firms registered with the PCAOB, including auditors of public companies and broker-dealers,” said PCAOB acting chairman Daniel Goelzer.

Another new rule allows for a firm to succeed to the registration status of a predecessor firm without a break in that registration status and without the need to file a new registration application.

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