PCAOB Exploring Alternative for Auditor Identification

The PCAOB appears to be backing away from requiring engagement partners be identified in an audit client's annual report.
Matthew HellerOctober 2, 2014
PCAOB Exploring Alternative for Auditor Identification

Bowing to the concerns of the accounting profession, the Public Company Accounting Oversight Board is considering an alternate way of publicly identifying audit-firm partners.

identificationSince 2005, the board has been exploring how to make auditors’ reports more transparent. As part of that process, it proposed that the engagement partner be identified in the auditor’s report, which is included in a company’s 10-K.

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But according to the Wall Street Journal, big audit firms have raised concerns that naming the partner in the 10-K would increase their liability and could lead to complications and delays in the disclosure.

PCAOB Chairman James Doty is now proposing giving firms the option of disclosing the name in a “Form 5” that would be filed no more than 60 days after the 10-K is issued.

In an updated agenda released Wednesday, the board said its staff is drafting a supplemental request for public comment on Doty’s proposal.

Some in the accounting profession had supported naming the engagement partner in Form 2 of the annual reports audit that firms file with the PCAOB. But that could delay disclosure until more than a year after a 10-K filing.

Cindy Fornelli, executive director of the Center for Audit Quality, told the Journal of Accountancy she was “encouraged” that the board was exploring the Form 5 alternative. “While we broadly support enhancing transparency into the audit, the CAQ maintains that the auditor’s report is not the most sensible place to include this information, given legal consent issues that could arise,” she said.

Investor advocates have argued that disclosure of the engagement partner’s name would subject auditors to the same public accountability that other professionals such as doctors and lawyers face.

“We are absolutely committed to getting the name of the engagement partner in the hands of investors,” Doty told the WSJ.

Source: Accounting Today PCAOB may consider different mechanism for naming engagement partner