PCAOB Solicits Public Comment on Disclosure of the Engagement Partner and Other Participants in the Audit on a New PCAOB Form
The Public Company Accounting Oversight Board today issued a supplemental request for comment on whether to require firms to file a new PCAOB form to make public the name of the audit engagement partner and information about certain other participants in the audit.
The Board is seeking comment on the proposed form, PCAOB Form AP, as a potential alternative to the Board's 2013 proposal to promote audit transparency by providing these disclosures in the auditor's report.
"A cornerstone of our effort to provide investors more information about the audit and the auditors who conduct them is our consideration of disclosure to investors of the identity of the engagement partner and other firms that conduct an audit," said PCAOB Chairman James R. Doty. "Knowing the identity of the engagement partner plays a key role in investor confidence and capital formation in those jurisdictions where it is provided to investors. Form AP is a middle ground approach that would provide investors this disclosure in a manner that responds to auditors' concerns about risk."
In December 2013, the PCAOB proposed a rule that would mandate disclosure in the auditor's report of the name of the engagement partner and information about certain other participants in the audit. Today's request for comment explores an alternative to that proposal.
PCAOB Form AP—Auditor Reporting of Certain Audit Participants—would be created and put into service specifically as a public information vehicle. Audit firms would use Form AP to disclose the name of the engagement partner on the audit, in addition to information about certain other participants.
All Forms AP would be posted and made searchable on PCAOB's website. In addition to filing Form AP, auditors could voluntarily provide the same disclosures in the auditor's report.
"Form AP would provide investors and other financial statement users with the information they have continued to request—the name of the engagement partner and information about certain other participants 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," said Martin F. Baumann, PCAOB Chief Auditor and Director of Professional Standards.
Currently, auditor's reports generally disclose only the name of the firm issuing the report. There is seldom information on other firms that participated in the audit or information about the partner who led the work.
"Auditor transparency is a way to use the motivating power of our markets to incentivize higher quality audits," said Doty. "But to do so, the markets need information."
For several years, the Board has been considering requiring auditors to provide more information about key participants in audits, including the engagement partner and firms other than the one issuing the auditor's report. Providing such information would provide additional transparency about who is responsible for performing an audit for the benefit and use of investors and other market participants.
The PCAOB, acting on the recommendation of the Department of Treasury's Advisory Committee on the Auditing Profession, began the transparency rulemaking process in 2009 when it issued a Concept Release on requiring the engagement partner to sign his or her own name to the auditor's report.
In October 2011, the Board issued a proposal that, among other things, would have required disclosure of the name of the engagement partner in the auditor's report without requiring a signature, as well as disclosure of certain information about other participants in the audit.
December 2013 saw the reproposal that amended some of the disclosure requirements, but kept the disclosure in the auditor's report.
In addition to the various proposals and releases, auditor transparency has been the subject of Standing Advisory Group and Investor Advisory Group meetings. Further background and relevant documents on the initiative can be found on the PCAOB website on its own page: Docket 029.
Comments on the Form AP disclosure alternative are due August 31, 2015.
A fact sheet on the proposal also is available.