On December 15, 2015, the Public Company Accounting Oversight Board (PCAOB) adopted new rules and related amendments to auditing standards (Rules) to provide investors with more information about who participates in public company audits, facilitating greater transparency to investors. The Rules will require auditors to disclose on a new PCAOB Form AP, Auditor Reporting of Certain Audit Participants (Form AP), the following: (1) the name of the engagement partner; (2) the names, locations and extent of participation of other accounting firms that took part in the audit, and if their work represented 5 percent or more of the total audit hours; and (3) the number and aggregate extent of participation of all other accounting firms participating in the audit whose individual participation constituted less than 5 percent of the total audit hours. Form AP will need to be filed through the PCAOB’s existing web-based Registration, Annual, and Special Reporting system within 35 days (or within 10 days, in the case of an initial public offering) after the date the auditor’s report is first included in a document filed with the Securities and Exchange Commission. The filings will be available on the PCAOB’s website in a single searchable database. In a release by the PCAOB announcing the adoption of the Rules, James Doty, PCAOB chair, noted that “[t]ransparency about the partner and firms involved should further incentivize auditors to organize audit teams conscientiously to give investors comfort that is reliable.”
The Rules are subject to SEC approval. If approved, disclosure of the engagement partner would apply to auditor’s reports issued on or after the later of January 31, 2017, or three months after final approval of the Rules is granted by the SEC. The requirement of disclosure of other audit firms participating in the audit would be effective for reports issued on or after June 30, 2017.
For the PCAOB’s adopting release with respect to the Rules, click here.