New reporting requirements for US firms are unlikely to have a major impact on resources or cost although it should make information easier to extract, according to a mid-tier partner.
US accounting firms registered with the Public Company Accounting Oversight Board (PCAOB) will be required to publish annual information from 2009 onwards including audit fees, the disciplinary history of staff and disciplinary proceedings against the firm.
The PCAOB adopted the new rules for annual and special reporting of information and certain events in line with the Sarbanes-Oxley Act. Reports will be publicly available on the board’s website.
BDO Seidman national director of assurance Wayne Kolins said he does not believe the new level of disclosure is significantly different from what firms already reveal when they go through the rigorous registration process with the audit watchdog.
“Having gone through the [PCAOB] registration [five years ago] there’s nothing that we see that is really new stuff and in some respects it’s less onerous than the original registration,” he said.
Kolins said some of the publicly-available information on firms is hard to get to “because the systems didn’t necessarily generate information so easily”.
PCAOB chairman Mark Olson said the board has put in place requirements that would ensure fundamental information about more than 1,800 firms was kept up-to-date and significant events were promptly disclosed.
The framework includes two types of reporting obligations. First, each registered firm must annually provide basic information about the firm and its issuer-related practice over the most recent 12-month period. Disclosures include information about audit reports issued by the firm during the year, certain disciplinary history information about staff that have joined the firm and information about fees billed to audit clients.
Registered firms must also report incidents ranging from a change in the firm’s name to the institution of certain types of proceedings against a firm or staff.
Center for Audit Quality executive director Cindy Fornelli said the framework was a welcome move that improved and standardised the process in which auditing firms share important and useful information with regulators, investors and other stakeholders.
“The new reporting structure also provides a solid reporting foundation should the PCAOB also consider, at some point, the feasibility and the public benefit of additional auditing firm disclosures that may assist audit committees, investors and others as they assess each firm’s commitment to audit quality,” she added.
Kolins is unsure of the value the information contained within the PCAOB reports holds for the investor community. He said some of the talk in Europe and the UK about reporting that focuses more on audit quality is of greater value to the marketplace.
“Those are interesting and more to the point what investors want to see. I’m not sure anybody is going to care much about the information that is in these PCAOB annual reports.
“I think transparency is important and the transparency that is meaningful relates to audit quality. What are the firms’ quality control procedures?
“The PCAOB inspection reports that are public information, that’s a very big step in the right direction. But they also want to know about the firm’s governances, how directors are elected, what the partner compensation process is like… all these things are indicative of the quality of the firm and to that extent the transparency is very valuable.”
The first annual reports will be due for the 12 month period ending on 31 March 2009, pending Securities and Exchange Commission approval.