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PCAOB Issues Staff Guidance for Firms on the New Form AP

Jun 29th 2016
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The Public Company Accounting Oversight Board (PCAOB) on June 28 issued staff guidance on the new Form AP, which audit firms will be required to file beginning in 2017 when disclosing the names of engagement partners and other firms participating in public company audits.

The audit regulator also launched a web resource page on the new form for investors, auditors, and others interested in the information.

Form AP, Auditor Reporting of Certain Audit Participants, was created as part of new rules and accompanying amendments to auditing standards that the PCAOB approved last December.

Under the new rules, which were approved by the US Securities and Exchange Commission on May 10, auditors will be required to file Form AP with the PCAOB and disclose the following:

  • The name of the engagement partner for all public company audits issued on or after Jan. 31, 2017.
  • Information about other audit firms participating in the audit for all public company audits issued on or after June 30, 2017. That information will include the names, locations, and extent of participation of other accounting firms that took part in the audit, if their work constituted 5 percent or more of the total audit hours. It also will include the number and aggregate extent of participation of all other accounting firms that took part in the audit whose individual participation was less than 5 percent of the total audit hours.

“Form AP will provide transparency to investors about the engagement partner and other accounting firms that took part in the audit,” Martin Baumann, PCAOB chief auditor and director of professional standards, said in a written statement. “The guidance issued today will help firms implement the processes required to deliver that information.”

The PCAOB staff guidance covers provisions of the new rules, such as assigning engagement partner identification numbers and estimating audit hours when disclosing the participation of other accounting firms, among other things. Staff may update this guidance as needed.

In regards to engagement partner identification numbers, the guidance states: “For each engagement partner this is responsible for a firm’s issuance of an issuer audit report, the firm must assign a 10-digit Partner ID number, beginning with the firm’s Firm ID – a unique five-digit identifier based on the number assigned to the firm by the PCAOB – followed by a unique series of five digits assigned by the firm. The unique series element could be sequential numbers, numbers based on the year the partner was admitted into the partnership, or random numbers.”

The guidance offers this example: “Firm A has 200 partners who serve as engagement partners for audits of issuers. Its Firm ID is 98715. The firm assigns Partner IDs using sequential numbers starting at 00001. Partner IDs will range from 9871500001 to 9871500200.”

The new Form AP web page provides additional resources to audit firms preparing to comply with the new rules, such as general instructions for the form and a sample form that can be downloaded for reference.

Firms may submit an individual Form AP using a web form or may submit multiple forms at once using XML. For firms that elect to submit their forms using XML, the page includes the technical instructions and related schema for XML.

“We recognize that setting up these new processes will take firms some time,” Baumann said. “PCAOB staff is ready to help wherever possible.”

PCAOB staff intends to hold conference calls later this year for firms that have questions about the use of technology in submitting Form AP. Firms also will have an opportunity to conduct test runs of Form APs submitted using the web form and XML.

Early next year, investors and others will be able to conduct searches of the Form AP database from the PCAOB website. Users will be able to search by engagement partner name, audit firm, or public company name. Over time, the database can be used to evaluate a number of data points about the engagement partner, including industry experience and number of years as engagement partner of a particular company.

Related articles:

PCAOB Adopts New Rules Naming Audit Engagement Partner
SEC Gives Green Light to PCAOB Rule on Naming Engagement Partner


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