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Oversight Board Bills Companies

Public firms will help finance operations of the new watchdog of the accounting industry.

August 05, 2003|From Bloomberg News

The new U.S. accounting oversight board has begun charging public companies fees to finance its operations, which will cost most firms less than $1,000 a year -- though some will pay more than $1 million.

The Public Company Accounting Oversight Board said Monday that it was sending invoices to all public companies with a market value of more than $25 million and all mutual fund companies that control assets greater than $250 million.

The fees are determined by a company's size. About 5,200 companies and 3,300 fund companies will get bills.

The PCAOB, created by Congress last year under the Sarbanes-Oxley corporate reform law, is the new watchdog of the accounting industry.

Some critics have decried the compliance costs that the Sarbanes-Oxley Act imposes on companies. The PCAOB fees are just one element of those costs.

About 62% of companies will pay $1,000 or less in annual fees to the board. The largest 1,000 firms will pay about 87% of the total fees collected.

"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," PCAOB Chairman William J. McDonough said.

"The largest bill we'll be sending will be in the neighborhood of $1.3 million," board member Daniel Goelzer said. "But there are only a handful of companies that will be receiving bills of more than a million dollars."

The largest companies by market value include Microsoft Corp. and General Electric Co.

"A million dollars to a big company is a sensible investment in what will convey a sense of integrity and fairness to the market," Securities and Exchange Commission member Harvey Goldschmid said.

The PCAOB, which replaces a system of self-regulation among accounting firms, is overseen by the SEC, which on Friday approved the board's $68-million budget and its plan to collect fees from public firms.

Public companies will pay about 96% of the fees and mutual fund companies will pay about 3.5%, the board said. Other investment firms will pay the rest.

The PCAOB also has begun notifying companies of fees that are due to support the Financial Accounting Standards Board, which sets accounting rules. Before the Sarbanes-Oxley law mandated those fees, two-thirds of the FASB's budget came from the sale of publications and the remainder came from soliciting companies. Critics say the solicitations compromise the FASB's independence.

The PCAOB also is requiring accounting firms to pay fees to cover the costs of registering with the board.

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