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From Securities Regulation Daily, December 15, 2015

PCAOB adopts engagement partner disclosure rule

By Jacquelyn Lumb

Following multiple rounds of public comment over more than a five-year period, and input from the Standing Advisory and Investor Advisory groups, the PCAOB unanimously approved rules to require the disclosure of audit engagement partners and other firms that play a significant role in audits. PCAOB Chair James Doty noted that the new rules bring U.S. audits more in line with international practices, an area in which it has been an outlier in financial reporting (PCAOB Release No. 2015-008, December 15, 2015).

If approved by the SEC, for auditor’s reports issued on or after January 31, 2017 (or three months after SEC approval, whichever is later), the engagement partner will be required to file a new Form AP which includes the name of the engagement partner; the names, locations and extent of participation of other accounting firms in the audit if their work constitutes five percent or more of the total audit hours; and the aggregate extent of the participation of all accounting firms whose individual participation is less than five percent of the total audit hours. The rules will allow for reasonable estimates on the hours that are reported.

Disclosure deadlines. The first filing deadline for reporting the engagement partner will be 35 days after the date the auditor’s report is first included in a document filed with the SEC. For initial public offerings, the deadline is 10 days after the auditor’s report is first included in a document filed with the SEC. The requirement to report other audit firms that participated in the audit will be effective for reports issued on or after June 30, 2017. The rules will apply to emerging growth companies but not to auditors of broker-dealers.

The staff plans to issue implementation guidance once the SEC approves the rules. The guidance will include, among other things, examples of total audit hours and illustrative language should a firm decide to voluntarily disclose the engagement partner in its audit report.

The release is No. 2015-008.

MainStory: TopStory PCAOBNews AccountingAuditing

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