On October 11, 2011, the PCAOB unanimously approved a proposal for changes to certain disclosures in the audit report. The proposal is identified as PCAOB Release No. 2011-007, “Improving the Transparency of Audits: Proposed Amendments to PCAOB Auditing Standards and Form 2.”
The proposed amendments are summarized in Release 2011-007 as:
The Public Company Accounting Oversight Board (“PCAOB” or “Board”) is soliciting public comment on amendments to its standards that would improve the transparency of public company audits. The proposed amendments would:
- require registered public accounting firms to disclose the name of the engagement partner in the audit report,
- amend the Board’s Annual Report Form to require registered firms to disclose the name of the engagement partner for each audit report already required to be reported on the form, and
- require disclosure in the audit report of other independent public accounting firms and other persons that took part in the audit.
This proposal would not require the engagement partner to separately sign the audit opinion. It merely would require that the partner’s name be disclosed on the opinion.
Is this proposal a big deal? No. I tend to agree with Jim Peterson, “The PCAOB Wants to Name Audit Engagement Partners: Would Its “Red A” Really Matter? when he says that this is not a substantive matter. This additional piece of information will not cause the scales to fall away from the eyes of investors.
However, it does signal the possibility a small defeat for the entrenched large audit firms. Large audit firms are not accustomed to losing any battles, however inconsequential. And how long has this battle lasted? The underlying concept release (“Concept Release on Requiring the Engagement Partner to Sign the Audit Report,” PCAOB Release No. 2009-005) was approved on July 28, 2009. Approval of this proposal won’t take place until early 2012, if at all.
The PCAOB has had three years on this and this is all it came up with?
Debit and credit — David Albrecht