October 7, 2003
To Managing Partners of SEC Practice Section
Member Firms
Re: Changes to Member Firm Annual Report and QCIC Reporting Requirement
Since many member firms of the AICPA SEC Practice Section (“SECPS” or the “Section”) are currently
in the process of registering with the Public Company Accounting Oversight Board (“PCAOB”), the
SECPS Executive Committee recently approved certain changes to the Section’s membership
requirements. Those changes include 1) a substantial revision to simplify the member firm annual report
that is filed with the Section, and 2) a discontinuation of the Quality Control Inquiry Committee (“QCIC”)
reporting requirement. Both of these changes are described in more detail below:
Revision to the Member Firm Annual Report Filed with the Section
The Executive Committee eliminated certain reporting requirements from the Annual Report, because
they are largely duplicative with the registration reporting requirements of the PCAOB. However, in
doing so, the Executive Committee added a reporting requirement in the form of a simple question with
respect to registration with the PCAOB.
These revisions are effective immediately. Firms that have not yet filed their annual reports with the
Section, but have been requested to do so, have the option of completing the new annual report form or
the prior version.
(The revised SECPS Member Firm Annual Report is included as Attachment I. Attachment II of this
letter includes the related revision to §1000.08(g) of the SECPS Reference Manual.)
Discontinuation of QCIC Reporting Requirement
The Executive Committee eliminated the requirement to report cases to the QCIC on the earlier of
October 1, 2003 or the date that a firm’s registration application with the PCAOB has been accepted. The
Executive Committee made this revision in recognition that firms registered with the PCAOB, including
its associated persons, are subject to investigation and disciplining by the PCAOB. Cases previously
reported to the QCIC will continue to be processed, in accordance with the QCIC’s normal operating
procedures, through December 31, 2003.
(Attachment III of this letter includes the related revision to §1000.08(k) of the SECPS Reference
Manual.)
ing
To the Managing Partners of SEC Practice Section Member Firms
October 7, 2003
Page 2
In making the revisions noted above, the Executive Committee recognized that many of the Section’s
other membership requirements have either been adopted by the PCAOB as interim quality control
standards (see PCAOB Release No. 20003-006, dated April 18, 2003, for a listing of the PCAOB’s
http://www.pcaobus.org/rules/Release2003-006.pdf)
Interim Professional Standards; available at http://www.pcaobus.org/rules/Release2003-006.pdf or have
been superceded by SEC rulemaking (such as the partner rotation requirement through the SEC’s January
28, 2003 independence rule; available at http://www.sec.gov/rules/final/33-8183.htm). The changes
made with respect to the member firm annual report to the Section and the reporting to QCIC were not
adopted by either the PCAOB or SEC; therefore, the Executive Committee thought it was prudent to
make revisions in light of recent PCAOB activities and firm registration with the PCAOB.
Finally, the SECPS Executive Committee has been working with AICPA leadership to develop a new
framework for a voluntary firm membership center that will provide a forum for member firms to express
their views and ideas related to public company audit practice, promote those firms’ and the auditing
profession’s position before the SEC and PCAOB, and be a vehicle to improve member firms’ practices
through the education and communication of issues and ideas involving SEC/PCAOB practice and the
unique issues associated with being a PCAOB registered public accounting firm. The Center, which will
essentially succeed SECPS, will also have a peer review program, similar to the SECPS peer review
program. However, the primary objectives of the Center will shift from the present SECPS self-
regulatory focus to one that concentrates on enhancing the quality of member practice through
representation as the profession’s liaison with the regulators and through education, communication and
debate. The new Center will effectively replace the current SECPS membership structure in 2004. The
proposed new Center will be presented to AICPA Council for approval later this month. The Executive
Committee encourages all firms to stay tuned for further developments in this area.
If you have any questions regarding the above, please contact me or Jennifer Roddy, Director – SEC
Practice Section, at (201) 938-3020 or via e-mail at jroddy@aicpa.org.
Sincerely,
Robert J. Kueppers
Chair
SECPS Executive Committee
cc: Donald Nicolaisen, Chief Accountant, Securities and Exchange Commission
Jerry Sullivan, Executive Director, Transition Oversight Staff
SEC Practice Section Annual Report
Attachment I
Report due to the SEC Practice Section within 90 days of the firm’s fiscal year end.
Firm Name: __________________________________________________________________________________
Address of main headquarters:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Telephone No. (______) ______-____________ Fax No. (______) ______-____________
1. Form of business entity
Sole proprietorship Partnership Corporation LLC LLP Other (please identify) _________
URL of firm Web site:_______________________________________________________________________
2. (A) Name of managing partner or equivalent Mr. Ms. ________________________________________
AICPA Membership Number ___________________________________________________________
Address (if different from main headquarters) ________________________________________________
________________________________________________
Telephone No. (______) ______-____________ Fax No. (______) ______-____________
E-mail Address ________________________________________________________________________
(B) Name and address of person to contact at the firm concerning SECPS membership and other matters
Mr. Ms. _________________________________________ Title ____________________________
Address ______________________________________________________________________________
_____________________________________________________________________________________
Telephone No. (______) ______-____________ Fax No. (______) ______-____________
E-mail Address_________________________________________________________________
3. Number of offices ________. List all locations (including all office addresses and telephone number(s) for each
location) in Exhibit A if the firm has more than one office or an office has more than one geographic location.
4. Month in which the firm’s (A) Fiscal year ends: ______ (B) Peer Review year ends: ______
(C) Educational year ends: ______
SEC Practice Section Annual Report
5. Firm Personnel - Complete the following table regarding the number of personnel as of the firm’s fiscal year
end:
CPAs Non-CPAs Total
Partners (or individuals with similar status)
Professionals (other than partners)
Other Personnel
Total Personnel
6. Have you made the necessary reports, if any, to the Quality Control Inquiry Committee regarding any litigation
or publicly announced regulatory proceedings or investigations against your firm or its personnel relating to
SEC audit clients? Yes No N/A
7. Have any firms been merged or acquired during the year? Yes No If yes, have the merged or acquired
firm’s numbers been included in the numbers reported on this form? Yes No If there have been any
mergers or acquisitions during the year, please provide the names and addresses of the firms merged or
acquired during the year with this report in Exhibit B.
8. Does the firm have any foreign associated firms that audit SEC registrants for which the international
organization or the individual foreign associated firm have represented in writing that policies and procedures
are consistent with the objectives set forth in Appendix K of Section 1000 of the SEC Practice Section
Reference Manual have been adopted? Yes No If yes, please provide the name and address, including
the country, of the foreign associated firm on Exhibit C to the annual report. If this information changes after
filing the annual report, the firm should amend its annual report by providing the SEC Practice Section
an updated Exhibit C listing of foreign associated firms. This amended report should be provided as
soon as practicable, (ordinarily presumed to be due within 30 days of a change in foreign associated
firms).
9. PCAOB Registration – Has the firm applied for registration with the PCAOB? Yes No
If yes, indicate the following:
- Total number of issuers for which the firm prepared audit reports during the preceding calendar year, as
most recently reported to the PCAOB __________
- Total number of issuers for which the firm played a substantial role in the audit during the preceding
calendar year, as most recently reported to the PCAOB __________
SIGNATURE
This report should be signed either by the managing partner, the partner in charge of the firm’s accounting and
auditing practice or another partner knowledgeable with the membership requirements of the SEC Practice Section.
Signature _________________________________________ Date _________________________________
Print Name: ________________________________________ Title:_________________________________
Fiscal Year End Covered By This Report _______________________________________________________
SEC Practice Section Annual Report
Exhibit A
Item 3 – List of all Office Locations
Firm Name: ___________________________________
Provide a current listing of all locations for offices of the firm if the firm has more than one office or an office has
more than one geographic location: including the complete office address and telephone number.
Firm/Office Name Address Telephone Number(s)
SEC Practice Section Annual Report
Exhibit B
Item 7 – Firms Merged or Acquired During the Year
Firm Name: ___________________________________
Provide a list of all firms that have been merged or acquired during the year: including the complete office address
and telephone number.
Firm/Office Name Address Telephone Number(s)
SEC Practice Section Annual Report
Exhibit C
Item 8 – List of Appendix K Foreign Associated Firms
Firm Name: _______________________________ Date of Listing: __________________
Part 1 – Current Listing of Foreign Associated Firm: Provide an updated listing of foreign associated firms at
the date of the annual report filing and update such list within 30 days of any change to such listing.
Address Date of Foreign Associated
Foreign Associated Firm Name (Including Country) Firm Status*
* Provide the date the foreign associated firm was added to the list if it occurred within the firm’s last full fiscal
year or, if this is an amendment to the last annual report, during the year-to-date period for the current fiscal year.
Part 2 – Listing of Firms Removed From the Listing of Foreign Associated Firm List: Provide a listing of
foreign associated firms removed from the listing in Part 1 during the firm’s last full fiscal year or, if this is an
amendment to the last annual report, during the year-to-date period for the current fiscal year.
Foreign Associated Firm Name Address Date The Foreign Associated
That Has Been Removed (Including Country) Firm Was Removed
Attachment II
§1000.08(g) – Revision to the Membership Requirement Regarding the
Annual Report to the SEC Practice Section
Text that has been stricken-through has been deleted, and text that has been underlined is new.
§1000.08(g) File with the Section each fiscal year of the United States firm (covering offices
maintained in the United States and its territories) the following information, within ninety
days of such fiscal year, to be open to public inspection:7
(1) Address of the firm’s main headquarters and the form of business entity (for
example, partnership, LLP, LLC or corporation) and the URL of the firm’s
website (if applicable)
(2) Name of (a) managing partner or equivalent and (b) person to contact at the
firm concerning SECPS membership and other matters
(3) Number of offices and a listing of all locations of offices
(4) Month in which the firm’s (a) fiscal year ends, and (b) “educational year”
ends8
(5) A tabular summary of the firm’s partners or individuals with similar status,
professionals other than partners and other firm personnel. This summary
shall disclose the number of CPAs and non-CPAs for each category for the
current year.
(6) A table summary of the percentage composition of the firm’s fees for
services to all clients into each of the following three categories: (1) audit
and assurance services (specifically defined to include compilation
services), (2) tax services and (3) other services. These percentages shall be
determined based upon the firm’s internal management reporting system.
(7) For the current year, summarize the percentage composition of the firm’s
fees for all services rendered to SEC audit clients into each of the following
three categories: (1) audit and assurance services, (2) tax services and (3)
other services. These percentages shall be determined based upon the
firm’s internal management reporting system.
(8) A tabular summary for the current year for the total number of SEC audit
clients for which the firm is the principal auditor-of-record. To prepare this
summary, the firm shall determine the percentage of fees for other services
(as defined in the instructions to the annual report) to total audit and
7
See Appendix F, Section 1000.40 for resolutions regarding failures to meet certain membership requirements.
8
The annual report should disclose the member firm’s educational year, if different from its fiscal year, and any changes in the
educational year (See SECPS §8000.08(a)).
assurance fees for each individual SEC audit client and present as a
stratified summary as required by the Section. For this purpose, series of
unit investment trusts and series of limited partnerships sponsored by the
same entity shall be treated as one SEC client. For additional information,
see §1000.38 for clients to be considered to be SEC audit clients.
(9) After performing the ratio calculation in Item 8 above, for each of the firm’s
SEC audit clients, determine the number of SEC clients where the ratio of
(1) fees for other services to (2) fees for audit and assurance services as
determined in Item 8 above is greater than 100% for each of the last three
consecutive years, including the current year and enter the total on the
annual report. For firms filing their annual report for fiscal 2002 and 2003,
an optional transitional period may be used as defined in the instructions to
the annual report.
(10)(6)Representing that the firm has made the necessary reports to the Quality
Control Inquiry Committee regarding any litigation or publicly announced
regulatory proceedings or investigations against the firm or its personnel
relating to SEC audit clients.
(11)(7)Names of firms merged or acquired during the year and included in year-
end numbers reported above.
(12)(8) Whether the firm has had any foreign associated firms that audit SEC
registrants for which the international organization or the individual foreign
associated firm have represented in writing that policies and procedures that
are consistent with the objectives set forth in Appendix K of §1000 of the
SEC Practice Section Reference Manual have been adopted. If yes, provide
the name and address, including the country, of the foreign associated firm
as an attachment to the annual report. If this information changes after
filing the annual report, the firm should amend its annual report by
providing the SEC Practice Section with an updated Exhibit C listing of its
foreign associated firms. This amended report should be provided as soon
as practicable (ordinarily presumed to be due within 30 days of a change in
foreign associated firms).
(9) Reporting of whether the firm has filed an application for registration with
the PCAOB. If yes, report the total number of issuers for which the firm
prepared audit reports during the preceding calendar year, as most recently
reported to the PCAOB. The firm to also report the total number of issuers
for which the firm played a substantial role in the audit during the preceding
calendar year, as most recently reported to the PCAOB.
Attachment III
§1000.08(k) – Discontinuation of QCIC Reporting Requirement
Text that has been stricken-through has been deleted. The deleted text is effective the earlier
of October 1, 2003 or the date that a firm’s registration application with the PCAOB has been
accepted.
§1000.08(k) Report to the Quality Control Inquiry Committee (QCIC) any litigation (including criminal
indictments) against the firm or its personnel or any proceeding or investigation publicly
announced by a regulatory agency that alleges deficiencies in the conduct of an audit of the
financial statements or reporting thereon of a present or former SEC client.10 Such reports
shall also include any allegations made in such formal litigation, proceeding, or
investigation that a member firm or its personnel have violated the federal securities laws
in connection with services other than audit services. All reports of litigation, proceedings
or investigations to the QCIC shall be made within thirty days of service on the firm or its
personnel of the first pleading in the matter. With respect to matters previously reported
pursuant to this membership requirement, member firms shall report to the committee
additional litigation, proceedings or investigations within thirty days of their occurrence.
10
New member firms shall report within thirty days of joining the Section such litigation, proceedings or investigations, as
defined, as may have been filed or announced within the three-year period preceding the firm’s admission to the Section.