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‘An Insult to the Accounting Profession’ and Other Highlights From Comments on the PCAOB’s Proposal to Disclose Names of Audit Firm Partners

Yesterday was the deadline for commenting on the PCAOB's concept proposal for disclosing the name of audit partners and "other participants in the audit."

If this sounds familiar, it's because this was Plan C from the PCAOB (fourth round of comments) on this proposal and, miraculously, audit firms seem willing to live with disclosing partner names on Form AP. Also worth noting, 20 of the 44 comment letters — including several from audit firms — were posted just yesterday, so much like your PoliSci final, many people crammed for this one.

Anyway! As you might expect, these comment letters aren't exactly breezy reading. They're filled with hims and haws, caveats and suggestions. For example, the major audit firms aren't really that enthusiastic about disclosing info on Form AP, but because disclosing names in the actual audit report would summon demons from the depths of Hades, they can offer lukewarm support. Another common thread is that supporters of the audit firms want an extended filing deadline for Form AP; investor advocates want a shorter deadline. The suggestions are endless.

Nevertheless! I managed to dig through quite a few of them, so without further ado, here's a quick rundown of notable commenters, their positions and a little commentary:

  • Crowe Horwath: Supports disclosure on Form AP
  • CalPERS: Wants it to be known that the concerns about "increased liability" are bullshit. Also, they're only on board with disclosure on Form AP because it's better than nothing:

We do not believe that disclosure on Form AP as described in the release will achieve the same potential benefits of transparency and an increased sense of accountability as mandatory disclosure in the auditor’s report, but it would constitute an improvement

  • GAO: Supports disclosure on Form AP
  • KPMG: Supports disclosure on Form AP
  • Stanford School of Business: Maureen McNichols, Marriner Eccles Professor of Public and Private Management and Accounting supports disclosure on Form AP.
  • AFL/CIO: Supports disclosure on Form AP but states, "As a matter of principle, the best place for the engagement partner’s name to appear is in a signature at the bottom of the audit report."
  • Dixon Hughes Goodman: Supports disclosure on Form AP
  • CFA Institute: Supports disclosure on Form AP, however:

  • BDO: Supports disclosure on Form AP
  • EY: This sums up the audit firms' position: "While we continue to believe disclosures about the audit should focus on firm-wide accountability and not on specific individuals, the PCAOB's proposed use of Form AP is a much improved approach."
  • U.S. Chamber of Commerce, Center for Capital Market Competitiveness: The U.S. Chamber opposes and felt it was necessary to attach its previous two letters just so the PCAOB got the point.
  • Muddy Waters Research: Carson Block supports disclosure on Form AP even though it "represents the lowest level of the transparency proposals previously introduced by the Board."
  • PwC: Supports disclosure on Form AP and offer this suggestion:

[W]e recommended that any disclosure of the engagement partner should be coupled with identification of a member or members of firm leadership. The purpose of this requirement would be to alleviate any misimpressions that the audit report is the product of the engagement partner, rather than the firm.

  • Grant Thornton: Supports disclosure on Form AP but they DON'T HAVE TO LIKE IT:

  • John Roberts (No, not the Chief Justice, but for a nanosecond, you thought so, huh?): Opposes
  • CAQ: Supports disclosure on Form AP
  • McGladrey: Supports disclosure on Form AP
  • Deloitte & Touche: Supports disclosure on Form AP
  • IMA: Opposes. And I mean OPPOSES:

Crikey, I could've written a whole blog post on just the IMA's comment letter.

So it seems, barring a march on PCAOB headquarters by the IMA and the U.S. Chamber, that Form AP will be a thing in the not-so-distant future. It won't quite reach the accoutability level of grade school children, but I suppose it's something.

Correction: An earlier version of the post stated that Professor Marriner S. Eccles supported disclosure on Form AP. Maureen McNichols, the Marriner S. Eccles Professor of Public and Private Management and Accounting, wrote the comment letter supporting disclosure on Form AP. Sorry about that.