Audit Oversight - CPAB
As of January 1, 2004, public accounting firms that audit reporting issuers are required to participate in the CPAB Oversight Program, and provide notice to their audit clients and securities regulators of any sanctions or restrictions imposed by the CPAB.
Participating firms must be in good standing at the time it issues an auditor's report which means that its participation agreement is not suspended or terminated by the CPAB, and the firm has complied with, and, if applicable, continues to comply with, any sanctions or restrictions imposed by the CPAB.
If the CPAB imposes sanctions on a participating audit firm, that firm must notify audit committees of all reporting issuers that they audit and the applicable regulator(s), in writing, within 5 business days of the sanctions being imposed. Also, audit firms making a proposal to undertake a new audit of a reporting issuer must advise the issuer's audit committee of any sanctions imposed in the preceding 12 months.
CPAB may additionally impose restrictions on a participating audit firm in order to address defects in the firm's quality systems. If a firm has such restrictions imposed on it, it must notify applicable regulator(s) in writing, within two days, of the defects in the quality control system. The notice should include date the restrictions were imposed and the time period within which the firm agreed to address the defects. If the audit firm fails to address the defects in the agreed upon timeline, it must notify the audit committee of all reporting issuers for which it is auditor. In this case, the written notice to the audit committee must include a complete description of the defects, the restrictions imposed by the CPAB, including the date the restrictions were imposed and the time period within which the participating audit firm agreed to address the defects, and the reasons it was unable to address the defects to the satisfaction of the CPAB.
