SEC Gives Green Light to PCAOB Rule on Naming Engagement Partnerby
A new rule issued by the Public Company Accounting Oversight Board (PCAOB) at the end of last year that requires audit firms to disclose the names of each engagement partner in a public company audit was approved by the US Securities and Exchange Commission (SEC) on May 10.
Under the new audit transparency guidelines, audit firms will also have to disclose information about the role played by other accounting firms that participated in the audit.
Beginning in 2017, auditors will be required to file a new Form AP, Auditor Reporting of Certain Audit Participants, with the PCAOB. That form must 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.
“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,” PCAOB Chairman James Doty said in a written statement. “Form AP will provide that important information to investors.”
The information filed on Form AP will be available through a searchable database. Users will be able to search the database by engagement partner name, public company name or issuer name, and by audit firm to see the engagement partner assigned to an audit.
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 intends to release staff guidance and other tools for audit firms to use as they implement the new rules.