After several months of debate, plans are set to take effect next year
The Securities and Exchange Commission has approved a plan by the Public Company Accounting Oversight Board to require audit firms to disclose the names of audit engagement partners and to provide more information about other firms that participate in audits.
The PCAOB hopes the new rules will improve the transparency of audits by identifying the lead person in charge of conducting them and shed more light on additional firms that participate, particularly those who contribute audit work on overseas operations.
Audit firms are required to file with the PCAOB on a new form, Form AP, the name of the engagement partner for all public company audits issued on or after January 31, 2017. Information about other audit firms participating in the audit must be filed for all public company audits issued on or after June 30, 2017.
"Auditing is a profession built on reputation, and one important way investors can assess the quality of an audit is to know who conducted that audit," said PCAOB Chairman James R. Doty. "Form AP will provide that important information to investors."
The information filed on the form will be available through a searchable database where users will be able to search by engagement partner name, by public company or issuer name, and by audit firm to see the engagement partner assigned to an audit.
Audit firms failed in their attempt to oppose the new rules, which they say could put undue scrutiny on individual audit partners. They did, however, succeed in overturning the original plan to require audit partners to sign the audit report, in the same way CEOs and CFOs are required to certify financial statements. The PCAOB ultimately decided to scrap that plan over concerns about liability, instead requiring identification in a separate filing.
Database users also will be able to search for the name, location, and extent of participation of other audit firms that participated in the audit.
The PCAOB expects to release shortly staff guidance and other tools for firms to use in implementing the new rules.