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PCAOB Proposes To Require Disclosure of Engagement Partners Name

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PCAOB PROPOSES TO REQUIRE DISCLOSURE OF ENGAGEMENT PARTNERS NAME


By Jim Pitrat, CPA - Practice Leader, Assurance & Advisory Practice
NOVEMBER 3, 2011

EXECUTIVE SUMMARY The PCAOB issued Proposed Release No. 2011-007, Improving the Transparency of Audits: Proposed Amendments to PCAOB Auditing Standards and Form 2. The standard would amend auditing standards for public companies to require the disclosure of the engagement partners name in the audit report and disclosure in of the audit partners name in the PCAOB annual report Form 2 for each reportable audit, and disclosure of certain other individuals in the firm that participated in the audit report. Proposed Changes Under the proposal, the following changes would be made to current reporting for audit firms: Engagement Partners Name The name of the engagement partner responsible for the most recent financial statement audit would be included in the audit report. Certain exceptions would apply to the rule, under the proposal. These are: If the financial statements for all periods presented were audited during a single audit engagement that resulted in one engagement partner, only that partners name would be disclosed If the audit report is dual dated and the engagement partner has been changed during the period between the dual dates, both engagement partners would be disclosed

The standard includes several examples of proposed disclosures. Disclosure of Other Audit Participants The Board proposes to requiring disclosure in the audit report of the names of other accounting firms and others not employed by the firm) that participated in the audit. These disclosures would be required certain situations: The lead firm assumes responsibility for the work of another accounting firm (or individual that performs audit procedures) The lead firm shares responsibility with another firm
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When a firm assumes responsibility, the auditors report would disclose the name, location, and extent of participation of the other firm and other individuals not employed by the firm that performed procedures on the current periods audit. The disclosure would not be required for those performing the engagement quality review and certain other similar procedures such as those individuals with specialized skills or knowledge in a field other than accounting or auditing, or who are engaged by the company to provide direct assistance to the auditor (exinternal auditors). The standard would not require disclosure of portions of an audit are performed by offices in a country different from the country of the firms headquarters, provided that the work is performed by an office of the same accounting firm. Separate disclosure would be required only in respect of other participants whose individual extent of participation is 3% or more of total hours, subject to some specific limitations. Information To Be Disclosed The following information would be required: The names of other participants in the financial statement audit and, the audit of internal control over financial reporting or interim reviews For participating firms: The location of the firm, including the country in which participating firms are located For participating individuals: the country of residence The percentage of hours attributable to the other participants relative to total hours in the most recent periods audit

When dividing responsibility, the report would disclose the name and location of another accounting firm that audited the one or more subsidiaries, divisions, branches, components, or investments included in the financial statements. The foregoing information could be presented in a separate paragraph following the opinion paragraph or in an appendix to the report. PCAOB Annual Report Form 2 Annual Report Form 2 (annual registered firms must file each year) requires would be amended to require the name of the engagement partner responsible for the audit report. Comments and Responses The comment period for this proposal is January 9, 2012.

FOR FURTHER INFORMATION, PLEASE CONTACT ONE OF THE FOLLOWING:


JimPitrat: JPitrat@singerlewak.com 310.477.3924 PracticeLeader Assurance&Advisory HarmeetSingh: HSingh@singerlewak.com 408.294.3924
BusinessCombinationsSubjectMatterExpert

GaleMoore: GMoore@singerlewak.com 949.261.8600


BusinessCombinationsSubjectMatterExpert

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Los Angeles, OrangeCounty,SanDiego

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