PCAOB Reproposes Requirement that Audit Reports Include Engagement Partner Name and Disclosure of Other Audit Participants | Practical Law

PCAOB Reproposes Requirement that Audit Reports Include Engagement Partner Name and Disclosure of Other Audit Participants | Practical Law

On December 4, 2013, the Public Company Accounting Oversight Board (PCAOB) reproposed amendments to its auditing standards that would require additional disclosure in audit reports. Specifically, the reproposed amendments would require registered accounting firms to include in the audit report the engagement partner's name and certain disclosure about other independent accounting firms and other persons that participated in the audit.

PCAOB Reproposes Requirement that Audit Reports Include Engagement Partner Name and Disclosure of Other Audit Participants

by Practical Law Corporate & Securities
Published on 05 Dec 2013 • USA (National/Federal)
On December 4, 2013, the Public Company Accounting Oversight Board (PCAOB) reproposed amendments to its auditing standards that would require additional disclosure in audit reports. Specifically, the reproposed amendments would require registered accounting firms to include in the audit report the engagement partner's name and certain disclosure about other independent accounting firms and other persons that participated in the audit.
On December 4, 2013, the Public Company Accounting Oversight Board (PCAOB) reproposed for public comment amendments to its auditing standards that would require registered accounting firms to include in the audit report:
  • The name of the engagement partner who led the audit for the most recent period.
  • The names, locations and extent of participation (as a percentage of the total audit hours) of other public accounting firms that took part in the audit if their individual contribution exceeded 5% of total audit hours.
  • The locations and extent of participation (as a percentage of the total audit hours) of other persons not employed by the auditor who performed procedures in the audit if their individual contribution exceeded 5% of total audit hours. The names of these other persons would not need to be disclosed; instead all these persons would be listed as "persons not employed by the firm".
  • The participation of other persons in the audit, whether other accounting firms or other persons not employed by the auditor, that were individually responsible for less than 5% of the total audit hours would be disclosed on an aggregate basis without identification of names or locations.
As described in a press release, the purpose of the proposed amendments is to increase transparency of public company audits by providing investors with information about certain key participants in the audit.
Audit reports signed by large US auditing firms may be based in large part on the work of affiliated and undisclosed firms. The proposed amendments would enable investors to evaluate the other participants in the audit in the same manner investors evaluate the auditor that signs the audit report.
The proposed amendments would also help bring US audit practice in line with other countries that currently disclose the name of the engagement partner to investors. The PCAOB had earlier sought comment in a July 28, 2009 concept release on whether the audit report should include the engagement partner's signature in addition to the accounting firm's signature and in October 11, 2011 issued the original proposal on disclosing the name of the engagement partner and other participants in the audit (see Legal Update, PCAOB Proposes Requirement that Audit Reports Include Engagement Partner Name and Disclosure on Other Audit Participants).
In a fact sheet describing the reproposal, the PCAOB reiterated that including the engagement partner's name in the audit report would not change the auditors' performance obligations in conducting the audit.
The PCAOB is accepting comments on the proposed amendments until February 3, 2014.
Update: On January 30, 2014, the PCAOB extended the comment period for the proposed amendments until March 17, 2014.