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May 11, 2016

The SEC approves PCAOB’s audit partner disclosure rules

By Vincent Huck

The USA Securities and Exchange Commission (SEC) has approved the Public Company Accounting Oversight Board’s (PCAOB) rules which require the disclosure of certain audit participants.

The new rules, which were adopted by the PCAOB last December, require audit firms to file a new form, Form AP, with the PCAOB. Firms will be required to include on the form: the name of the engagement partner and information about other firms participating for all public company audits issued on or after 31 January 2017.

Required information about other firms includes but is not limited to: names, locations, and extent of participation of other accounting firms that took part in the audit.

The information provided on the new form will be publically available through a searchable database. The PCAOB is expected to release implementation guidance for firms.

Asked for comment a spokesperson for AICPA said: "The Center for Audit Quality (CAQ) responded for the profession on this particular issue. The AICPA’s Auditing Standards Board (which sets standards for private company auditors) did not submit a comment letter to the PCAOB."

However AICPA vice-president firm services and global alliances Mark Koziel had told sister publication The Accountant in an interview for the USA country survey in 2014: "What value will it bring to the end-user to have the engagement partner physically sign the audit report with their names instead of the name of the firm. Auditors are already doing the best job they possibly can and signing their name is not going to raise the level of quality of the audit."

Firms and other stakeholders had voiced similar critics towards the PCAOB’s project. The PCAOB responded to the critics by having the information disclosed on a separate form. As Martin Baumann, PCAOB chief auditor and director of professional standards, explained back in December 2015:

"Form AP will provide investors and other financial statement users with the information they have continued to request — the name of the engagement partner and information about other accounting firms participating in the audit — in a single searchable database, giving the market valuable information, while responding to concerns raised by accounting firms and others about the unintended consequences of such a disclosure in the auditor’s report."

Asked further by International Accounting Bulletin if the AICPA had any comments as to whether this was a better solution, if it believed this information was valuable and if this new requirements will have any consequence (positive or negative) for AICPA members who audit public companies, the spokesperson declined to answer.

At the time of publication, neither the CAQ nor the Big Four firms replied to International Accounting Bulletin’s call for comments.


Update 13/05/2016

"The CAQ supports the PCAOB’s efforts to respond to calls from financial statement users for increased transparency around the audit," Center for Audit Quality executive director Cindy Fornelli said. "The Board should be commended for its responsiveness to concerns raised by a variety of stakeholders regarding identifying the engagement partner in the auditor’s report by proposing disclosure of this information in the newly created Form AP. The CAQ continues to work with our member firms as they begin to prepare for implementation and will remain engaged with the PCAOB throughout this process."

a EY spokesperson replied: "EY does not have a statement at this time."

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