The Public Company Accounting Oversight Board voted today to issue for public comment proposed amendments to its standards that would bring greater transparency to public company audits.
The proposal would require registered accounting firms to disclose the name of the engagement partner in the audit report and on the PCAOB Annual Report form. It would also require disclosure in the audit report of other accounting firms and other persons not employed by the auditor that took part in the audit.
"This proposal would increase transparency of public company audits by providing investors with information about certain key participants in the audit," said James R. Doty, Chairman of the Public Company Accounting Oversight Board. "This would bring disclosures about U.S. audit engagement partners more in line with those provided for many engagement partners abroad."
The proposal to require disclosure of the name of the engagement partner follows and builds upon a related Concept Release issued by the PCAOB on July 28, 2009. That Concept Release considered requiring the engagement partner to sign his or her name on the audit report.
After careful consideration, the Board did not include in this proposal a requirement to sign the engagement partner's name on the audit report. Instead, the proposal would require that the engagement partner's name be disclosed in the audit report, which would make the engagement partner's name readily available to the users of the audit report while mitigating concerns about minimizing the firm's role in the audit.
The proposal also would amend PCAOB Form 2, the Annual Report, to require firms to disclose the engagement partner's name for each audit report listed on the form. The form provides basic information about the firm and the firm's issuer-related practice over the most recent 12-month period.
In addition, today's proposal would require the auditor to disclose in the audit report other accounting firms and other persons not employed by the auditor that took part in the audit. The proposed disclosure would enable investors to evaluate the other participants in the audit in the same manner that they evaluate the auditor. For example, knowing the name of a disclosed accounting firm that took part in the audit would enable investors to determine whether the firm is registered with the Board and has been subject to PCAOB inspection, or is located in a country that does not allow PCAOB inspections. Investors would also be able to verify whether a disclosed firm or person has had any publicly available disciplinary history with the PCAOB or other regulators.
"We've carefully studied the issue of enhancing the transparency of public company audits and discussed it with the Board's Standing Advisory Group and Investor Advisory Group. Now we look forward to receiving public comment on this proposal," said Martin F. Baumann, PCAOB Chief Auditor and Director of Professional Standards.
Comments on the proposed amendments are due January 9, 2012.