New reporting requirements for US firms are unlikely to have a
major impact on resources or cost although it should make
information on firms easier to extract, according to a mid-tier
US auditing firms registered with the Public Company Accounting
Oversight Board (PCAOB) will be required to publish annual
information from 2009 onwards, including audit fees, the
disciplinary history of staff and disciplinary proceedings against
The PCAOB adopted the new rules for annual and special reporting
of information as well as certain events in line with the
Sarbanes-Oxley Act. It will make the reports publicly available via
the PCAOB website.
BDO Seidman national director of assurance Wayne Kolins does not
believe the new level of disclosure is significantly different from
what firms already reveal when they go through the rigorous
registration process with the audit watchdog
“What we have got to do, and I assume all the firms are going to
do it, is to get our CFO and the internal council involved in
developing the mechanisms to come up with this information on a
regular basis,” he said.
“Having gone through the [PCAOB] registration [five years ago]
there is nothing that we see that is really new stuff and in some
respects it is less onerous than the original registration.”
Kolins said that some of the publicly available information on
firms is hard to get to, “because the systems did not necessarily
generate information so easily”.
PCAOB chairman Mark Olson said the board has put in place
requirements that would ensure fundamental information on more than
1,800 firms was kept up-to-date and significant events were
The framework includes two types of reporting obligations.
First, each registered firm must annually provide basic information
about the firm and its issuer-related practice from the most recent
Disclosures will include information about audit reports issued
by the firm during the year, certain disciplinary history
information about staff that have joined the firm and information
about fees billed to audit clients.
Registered firms must also report incidents ranging from a
change in the firm’s name to the institution of certain types of
proceedings against a firm or staff.
Center for Audit Quality executive director Cindy Fornelli said
the framework was a welcome move that improved and standardised the
process in which auditing firms share important and useful
information with regulators, investors and other stakeholders.
“The new reporting structure also provides a solid reporting
foundation should the PCAOB also consider, at some point, the
feasibility and the public benefit of additional auditing firm
disclosures that may assist audit committees, investors and others
as they assess each firm’s commitment to audit quality,” she
Kolins says the value of the information contained within the
PCAOB reports to the investor community is questionable. He says
some of the talk in Europe and the UK about reporting that focuses
more on audit quality is of greater value to the marketplace.
“Those are interesting
and, more to the point, what investors want to see,” he said. “I am
not sure anybody is going to care much about the information that
is in these PCAOB annual reports.
“I think transparency is important and the transparency that is
meaningful relates to audit quality. What are the firms’ quality
control procedures? The PCAOB inspection reports are a very big
step in the right direction.
“But they also want to know about the firms’ governances, how
directors are elected, what the partner compensation process is
like… all these things are indicative of the quality of the firm
and to that extent the transparency is very valuable.”
The first annual reports will be due for the 12-month period
ending on 31 March 2009, pending Securities and Exchange Commission
Arvind Hickman and Nicholas Moody