With no warning or fanfare, the Securities and Exchange Commission has established a formal process for audit firms to appeal the results of an inspection conducted by the Public Company Accounting Oversight Board.

The SEC adopted an amendment to its “informal and other procedures” to add a rule that would facilitate SEC reviews of PCAOB inspection reports when audit firms request them. Sarbanes-Oxley provides for such a review, and now the SEC rule gives the SEC’s chief accountant, Jim Kroeker, authority to review inspection reports and a procedure to follow to execute the review.

The 28-page rule outlines a series of procedures for firms to request a formal SEC review if they disagree with something the PCAOB plans to publish in an inspection report. Most notably, the rule gives the chief accountant the authority to silence a criticism that the PCAOB plans to publish if the chief accountant believes the criticism is not warranted.

The SEC did not respond to a request from Compliance Week to discuss the new rule. PCAOB spokesman Colleen Brennan said firms have always been permitted under Sarbanes-Oxley to seek an SEC review of a PCAOB inspection report, but now the process will delay the publishing of inspection reports.

“The PCAOB's practice has always been to issue a public report as soon as the board has approved a final report and transmitted it to the firm,” she said. “To comply with the new rule, the board will need to delay a public report for at least 30 days after transmitting the report to the firm and may have to delay portions of the public report even longer if the firm seeks SEC review.”

Under the existing process, the SEC process has not “restricted the transparency of board inspection reports pending the opportunity to seek review,” Brennan said.

Lewis Ferguson, a partner with law firm Gibson, Dunn & Crutcher formerly on staff at the PCAOB, said the rule likely is a response to the volume of appeals that firms have requested in recent years. “In some ways, the rule may benefit (firms that are appealing) because it places the decision-making authority in the hands of an accounting expert and into a single decision maker,” he said.

The rule includes a brief indication that the SEC does not intend to grant reviews without good reason. “In considering whether to grant a review request, among the factors that the Commission may consider are whether the review request makes a reasonable showing that the review is appropriate or otherwise presents a concern,” the rule says. “We do not intend to routinely grant review requests absent some indication of concern.”

Ferguson said that may indicate the SEC is trying to expedite the appeal process rather than stall the publishing of inspection findings. Though he’s never had a hand in an appeal personally, he said he’s aware that the process is “quite chaotic, with very unpredictable time periods.”

The rule takes effect Sept. 7.