With PCAOB Form, Finally Maybe Some Transparency into Identity of US Audit Partner

Just in time for mid-summer beach reading, the Public Company Accounting Oversight Board (PCAOB) has issued a Supplemental Request for Comment: Rules to Require Disclosure of Certain Audit Participants on New PCAOB Form as its possible solution for disclosing the name of the engagement partner responsible for the audit. Try not to be lulled to sleep by the title. Though it’s true that anytime “form” shows up in a government agency title, whether for the Division of Motor Vehicles, US Passport Office, or Internal Revenue Service, it usually means bureaucracy. However, in this case the PCAOB hopes that finally some progress can be made to provide investors the name of the audit engagement partner responsible for the audit. Completion of a “form” in this sense may finally lead to progress.

For years in the United States, the disclosure of the engagement partner has been a hotly contested issue between those in the audit profession who want to suppress the information and investors who believe that transparent disclosure of the engagement partner on the face of the audit opinion provides enhanced audit quality. Forget for a moment that most of the rest of the world has the engagement partner sign or otherwise disclose their name on the face of the audit report. Forget that architects, engineers, and even CEOs and CFOs sign their work. Nope, in the US the name of the engagement partner is hidden behind the name of the audit firm on the grounds that it otherwise would subject individual partners to increased liability.

So instead of continuing to fight that battle, the PCAOB now proposes the name of the engagement partner be shown on a new form “AP,” and filed with the PCAOB within 30 days of the audited financial statements being issued. Form AP would also be available on the PCAOB’s website for the general public to access.

CFA Institute agrees with PCAOB’s strategy to optimize transparency for investors, which we discussed in a blog post last October. Sometimes incremental steps are the way to achieve a larger objective. This new form is one such case.

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