The Public Company Accounting Oversight Board (“PCAOB”) recently reproposed amendments (the “Amendments”) to its auditing standards that would require disclosure in the auditor’s report of:
- the name of the engagement partner; and
- the names, locations and extent of participation (as a percentage of total audit hours) of other independent public accounting firms that took part in the audit, and the locations and extent of participation of other individuals and companies not employed by the auditor that took part in the audit, so long as the participant’s contribution exceeded 5% of the total hours in the audit engagement.1
The Amendments would not, however, require disclosure of information about:
- individuals performing an engagement quality review;
- individuals performing a review pursuant to Appendix K;2 or
- persons employed or engaged by a company who provide direct assistance to the auditor, including (a) internal auditors, other company personnel or third parties working under the direction of management or the audit committee who provide direct assistance in the audit of internal control over financial reporting or (b) internal auditors who provide direct assistance in the audit of the financial statements.
Currently, auditors’ reports in the United States generally only disclose the name of the accounting firm that issued the opinion. The PCAOB believes that the Amendments would improve the transparency of public company audits and allow investors to make more informed investment decisions, including whether to vote to ratify or not ratify the company’s choice of registered firm as its auditor. The PCAOB also believes that the Amendments may prompt engagement partners to perform their duties with a heightened sense of accountability.
The PCAOB issued the initial proposing release containing these reforms in October 2011 (the “Proposing Release”).3 The Amendments include revisions to the Proposing Release, which incorporate certain of the comments that the PCAOB received in response to the Proposing Release. Other than imposing new disclosure obligations, the Amendments would not change the performance obligations of the auditor in conducting the audit.
The PCAOB is seeking comments on the Amendments through February 3, 2014. In particular, the PCAOB is soliciting comments on the usefulness of the information that would be required to be disclosed, the potential costs that the Amendments might impose, whether the Amendments would have any effect on competition and whether the Amendments should apply to audits of “emerging growth companies,” as that term is defined in the Jumpstart Our Business Startups Act of 2012.