## Facts

- The Public Company Accounting Oversight Board (PCAOB) inspected PricewaterhouseCoopers LLP (PwC) and issued inspection reports dated March 25, 2009 and August 12, 2010.
- Each report included a public portion describing audit deficiencies and a nonpublic portion containing criticisms of or potential defects in PwC’s system of quality control.
- Under Sarbanes-Oxley Act § 104(g)(2) and PCAOB Rule 4009, a firm has 12 months from the report date to address quality-control criticisms to the Board’s satisfaction; otherwise, the nonpublic criticisms must be made public.
- PwC submitted remediation materials under PCAOB Rule 4009(a) for the remediation periods ending March 25, 2010 and August 12, 2011.
- The PCAOB evaluated PwC’s submissions and determined that, as of the end of each remediation period, PwC had not addressed certain quality-control criticisms to the Board’s satisfaction.
- PwC did not seek Securities and Exchange Commission review of the PCAOB’s determination and provided a written statement that was attached to the release as an appendix.
- The PCAOB stated that inspection observations are non-adjudicative and do not constitute conclusive findings of fact or violations for purposes of imposing legal liability.

## Issues

1. Whether PwC addressed the PCAOB’s quality-control criticisms within the 12-month remediation periods to the Board’s satisfaction under Sarbanes-Oxley Act § 104(g)(2) and PCAOB Rule 4009.
2. If PwC did not do so, whether the PCAOB was required to publicly disclose the previously nonpublic portions of the inspection reports containing those criticisms.

## Decision

- The PCAOB determined that as of March 25, 2010 and August 12, 2011, PwC had not addressed certain quality-control criticisms in the 2009 and 2010 inspection reports to the Board’s satisfaction.
- Pursuant to Sarbanes-Oxley Act § 104(g)(2) and PCAOB Rule 4009(d), the PCAOB made public the portions of the inspection reports addressing the unresolved criticisms.
- The PCAOB noted PwC’s decision not to seek SEC review and included PwC’s statement as an appendix without adopting or endorsing it.

## Legal Principles

- Sarbanes-Oxley Act § 104(g)(2) conditions confidentiality of quality-control criticisms in inspection reports on timely remediation satisfactory to the PCAOB; absent satisfactory remediation within 12 months, public disclosure is required.
- PCAOB Rule 4009 establishes the process for firm remediation submissions and authorizes disclosure of previously nonpublic criticisms when the Board finds remediation unsatisfactory.
- The PCAOB may evaluate remediation based on whether the firm made sufficient progress within the statutory period, not merely whether remedial steps were proposed.
- PCAOB inspection observations and related quality-control criticisms are not the product of an adversarial adjudication and do not constitute conclusive findings of violations or a basis for imposing legal liability.

## Conclusion

The PCAOB concluded that PwC’s remediation submissions did not satisfactorily address certain quality-control criticisms within the required 12-month periods and, as a result, publicly released the previously nonpublic report portions discussing those unresolved criticisms, while clarifying the non-adjudicative character of inspection observations.


In re PricewaterhouseCoopers LLP’s Quality Control Remediation Submissions, PCAOB Release No. 104-2013-054 (2013)