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”.
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By GlobalDataPCAOB 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.
Improved process
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.
