On December 15, 2015, the Public Company Accounting Oversight Board (PCAOB) issued PCAOB No. 2015-008, a new auditing rule designed to improve transparency regarding both the engagement partner and “other accounting firms” that may have taken part in the audit of issuers. PCAOB No. 2015-008 will be testable on the CPA exam starting April 1, 2017. The rule requires firms to file Form AP, Auditor Reporting of Certain Audit Participants, which is available to the public on the PCAOB’s website.
Filing of Form AP with the PCAOB is required no more than 35 days after the audit firm files the audit report with the SEC. For initial public offerings, Form AP is required to be filed no later than 10 days after the auditor’s report is first included in a document filed with the SEC.
Form AP requires the following information:
PCAOB Release No 2015-008 extracts:
“Information provided on Form AP is intended to help investors . . . research publicly available information about the firms identified in the form, such as whether a participating firm is registered with the PCAOB, whether it has been inspected and, if so, what the results were and whether it has any publicly available disciplinary history.”
“Investors will also have a better sense of how much of the audit was performed by firms in other jurisdictions, including jurisdictions in which the PCAOB cannot currently conduct inspections.”
“The PCAOB believes the transparency created by public disclosure should promote increased accountability in the audit process . . . Although auditors already have incentives to maintain a good reputation, such as internal performance reviews, regulatory oversight, and litigation risk, public disclosure will create an additional reputation risk, which should provide an incremental incentive for auditors to maintain a good reputation, or at least avoid a bad one.”
“The Board [also] believes additional transparency should increase accountability at the firm level. The Board has observed that some auditors allowed other accounting firms that did not possess the requisite expertise or qualifications to play significant roles in audits. Firms similarly have not always given the critical task of engagement partner assignment the care it deserves. Making firms publicly accountable in a way they have not been previously for their selections of engagement partners and other accounting firms participating in the audit should provide additional discipline on the process and discourage such lapses.”
If you’re sitting for AUD on or after April 1, 2017, this material will be testable. For more alerts and notices about new or upcoming testable exam material, subscribe to the Surgent CPA Review blog: Passing Insights.
Susan J. Cox, M.Acc., CPA is a Senior Technical Editor for Surgent CPA Review. Susan received her graduate and undergraduate degrees from Florida State University. Prior to joining Surgent, Susan worked as a technical editor for Thomson Reuters, an accounting instructor for the University of South Florida, a senior internal auditor for GTE, and an experienced senior auditor for Arthur Andersen & Co.
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