By Bryan Strickland, for Journal of Accountancy
Two PCAOB proposals issued for public comment Tuesday would require firms to report new metrics and information about themselves to the federal board that oversees audits of public companies.
The Firm and Engagement Metrics proposal would require PCAOB-registered public accounting firms that audit one or more issuers that qualify as an accelerated filer or large accelerated filer to publicly report specified metrics relating to such audits and their audit practice.
The Firm Reporting proposal would amend the PCAOB's annual and special reporting requirements to facilitate the disclosure of more complete, standardized, and timely information.
"Sound and consistent information bolsters confidence in our capital markets and can drive audit quality," PCAOB Chair Erica Y. Williams said in a news release. "Informed by extensive study and stakeholder input, today's proposals would strengthen PCAOB oversight and equip investors, audit committees, and others with clear, consistent, and actionable data related to the audit."
Public comments on the proposals should be submitted by June 7 (stakeholders also have until Friday to comment on a proposal related to auditors making false or misleading statements about PCAOB registration and oversight).
Firm and Engagement Metrics proposal
The metrics that would be required by the first proposal cover 11 areas: partner and manager involvement; workload; audit resources; experience of audit personnel; industry experience of audit personnel; retention and tenure; audit hours and risk areas (engagement-level only); allocation of audit hours; quality performance ratings and compensation (firm-level only); audit firms' internal monitoring; and restatement history (firm-level only).
The proposal would require the reporting of firm-level metrics annually on a new Form FM for firms that serve as the lead auditor for at least one accelerated filer or large accelerated filer. Reporting of engagement-level metrics for audits of accelerated filers and large accelerated filers would be logged on a revised Form AP.
The proposal would allow, but not require, limited narrative disclosures on both Form FM and Form AP to provide context and explanation for the required metrics.
Firm Reporting proposal
The second proposal would amend reporting requirements on the PCAOB's Annual Report Form (also known as Form 2) and the Special Reporting Form (Form 3) in five areas: financial information; audit firm governance information; network information; special reporting; and cybersecurity.
Most of the newly required information would be disclosed publicly, but some would be available to the PCAOB only for oversight.
The proposal also includes amendments to facilitate a provision under the QC 1000 proposal that would require firms to report their revised quality control policies and procedures if QC 1000 — proposed in November 2022 — is adopted.
— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.