Fact Sheet: Disclosure of Engagement Partner and Certain Other Participants on New PCAOB Form AP
The Public Company Accounting Oversight Board adopted new rules that will provide investors and other financial statement users with information about the engagement partners and accounting firms participating in audits of issuers on new PCAOB Form AP — Auditor Reporting of Certain Audit Participants.
The disclosures in Form AP are intended to provide increased transparency and accountability for key participants in issuer audits.
The PCAOB also adopted amendments to auditing standards that will permit voluntary disclosures in the auditor's report, in addition to filing Form AP.
The required disclosures under the final rules include:
- The name of the engagement partner; and
- For other accounting firms participating in the audit:
- 5% or greater participation: The name, city and state (or, if outside the United States, the city and country), and the percentage of total audit hours attributable to each other accounting firm whose participation in the audit was at least 5% of total audit hours;
- Less than 5% participation: The number of other accounting firms that participated in the audit whose individual participation was less than 5% of total audit hours, and the aggregate percentage of total audit hours of such firms.
In addition to filing this information on Form AP, the audit firm may voluntarily provide information about the engagement partner, other accounting firms, or both in the auditor's report.
- The information on Form AP will be available in a searchable database on the PCAOB's website. The database will include unique ID numbers for both engagement partners and firms to facilitate identification over time.
- Form AP has a basic filing deadline of 35 days after the date the auditor's report is first included in a document filed with the SEC, with a shorter deadline of 10 days after the auditor's report is first included in a document filed with the SEC for IPOs.
- Firms will file Form AP through the PCAOB's existing web-based Registration, Annual, and Special Reporting system.
The Board has chosen a phased effective date. Subject to approval by the Securities and Exchange Commission, the new rules will take effect as follows:
- Engagement partner: auditors' reports issued on or after January 31, 2017 or three months after SEC approval of the final rules, whichever is later
- Other accounting firms: auditors' reports issued on or after June 30, 2017.
New Rules and Amendments to Standards
The Board is adopting two new rules (Rules 3210 and 3211) and one new form (Form AP). The Board is also adopting amendments to AS 3101 (currently AU sec. 508), Reports on Audited Financial Statements, and AS 1205 (currently AU sec. 543), Part of the Audit Performed by Other Independent Auditors, related to voluntary disclosure in the auditor's report.
Rulemaking Rationale and History
- Documents associated with the initiative can be found on the PCAOB website under Docket 29.
- In 2008, the U.S. Department of the Treasury's Advisory Committee on the Auditing Profession issued its final report recommending, among other things, that the PCAOB "undertake a standard-setting initiative to consider mandating the engagement partner's signature on the audit report."
- In July 2009, the Board 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 in the auditor's report of the name of the engagement partner (without requiring a signature) and also would have required disclosure of other participants in the audit.
- In December 2013, the Board issued a reproposal that, among other things, would have required disclosure of the name of the engagement partner in the auditor's report, along with the name, location, and extent of participation of other accounting firms, and the location and extent of participation of non-accounting firms.
- In June 2015, the Board issued a supplemental request for comment on its 2013 reproposal that sought comment on (i) using a new form, Form AP, to require firms to disclose the name of the engagement partner and other accounting firms participating in the audit and (ii) whether to require disclosure of non-accounting firm participants.