by Cydney Posner
The SEC is expected to issue its concept release on improving audit committee reports “soon” (whatever that means) according to Compliance Week, and among the topics the SEC will examine is whether those “reports should include the audit firm’s tenure and the name of engagement partners.” If this all sounds vaguely familiar to you, it’s because the PCAOB has been batting around those two ideas (and more) for a very long time. See this post and this news brief.
According to the article, the PCAOB has targeted September 2015 as the timeframe for issuing a revised proposal on naming audit engagement partners (and others from outside the principal audit firm who contributed to the audit). The PCAOB’s earlier proposal would have required the audit engagement partner to be identified by name in the audit report. The revision, which would reflect a compromise position arrived at after substantial pushback from audit firms concerned about the potential for liability, would likely require disclosure in a separate form to be filed with the PCAOB but “accessible” to investors. (Ok, but how hard will they have to try?)
Given the difficulty the PCAOB has had in making progress, it is apparently now falling to the SEC to consider requiring these disclosures somewhere. Some have argued that the SEC is really the correct venue for this discussion, especially if, as they contend, the disclosure belongs more properly in audit committee reports, which are within the jurisdiction of the SEC. The arguments in support of that view are that audit firm tenure and the name of the engagement partner are really disclosure issues, not financial reporting issues, and that they are issues relevant to shareholder ratification of auditors and, therefore, should be disclosed in the proxy statement.