Background:
The Public Company Accounting Oversight Board (PCAOB) has released a pair of proposals that are intended to “benefit investors, audit committees, and others by increasing audit firm transparency, bringing consistency to the disclosure and calculation of audit firm and engagement metrics, and helping the PCAOB conduct its oversight.
Key Component of first proposal:
Firm and Engagement Metrics, “PCAOB-registered public accounting firms that audit one or more issuers that qualify as an accelerated filer or large accelerated filer” would be required “to publicly report specified metrics relating to such audits and their audit practice. Such metrics would include those related to:
| Partner and manager involvement | (6) Retention and tenure |
| Workload | (7) Audit hours and risk areas |
| Audit Resources | (8) Allocation of audit hours |
| Experience of audit personnel | (9) Quality performance ratings and compensation |
| Industry experience of audit personnel | (10) Audit firms’ internal monitoring |
Key Component of second proposal:
The second proposal, Firm Reporting, would enhance key aspects of the requirements related to the information registered public accounting firms report on the PCAOB’s Form 2 (i.e., the “Annual Report Form”) and Form 3 (i.e., the “Special Reporting Form”). Areas in which improvements would be made include:
| (1) Financial information | (4) Special reporting |
| (2) Audit firm governance information | (5) Cybersecurity |
| (3) Network information |
Comments on both proposals are due by June 7, 2024.
| The first proposal would enhance Reliable, consistent information can improve investors’ ability to make informed decisions about investing their capital, ratifying the selection of auditors, and voting for members of the board of directors. The second proposal seeks to update and improve the reporting requirements to facilitate more public disclosure that would be informative and useful to investors, audit committees, and other stakeholders. |
Ashutosh Sharma, Audit Associate, SW India
