What audit committees need to know about PCAOB’s Form AP

The PCAOB’s new rule requiring auditors to disclose the name of the engagement partner and other firms participating in the audit has important implications for audit committees.

Audit committees have broad responsibilities for evaluating and overseeing external auditors, who are subject to the new rule. The Center for Audit Quality, which is affiliated with the AICPA, published a tool Tuesday that provides considerations for audit committees with respect to the new rule.

PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants, requires independent registered public accounting firms to file a Form AP with the PCAOB for each audit report issued. Each Form AP includes the engagement partner’s name and will be accessible in a searchable database on the PCAOB website.

The names of other accounting firms participating in the audit also are required to be disclosed on Form AP. The rules related to naming the engagement partner took effect for audit reports issued on or after Jan. 31, 2017, and the rules related to disclosure of other accounting firms participating in the audit take effect for audit reports issued on or after June 30, 2017.

In light of the new rule, members of audit committees may wish to refresh their knowledge of the audit partner’s qualifications, industry experience, and other experience, according to the CAQ guide. Audit committee members also may want to understand whether the audit partner for their engagement also is the lead engagement partner on audits of other issuers.

Other considerations that audit committee members may wish to evaluate, according to the tool, include:

• Consistency with planning. PCAOB rules already require communication to the audit committee about audit participants. Is the disclosure of other accounting firms consistent with what the audit committee expected based on audit planning discussions?
• System of quality control. How does the firm’s system of quality control address quality matters pertaining to other firms participating in the audit?
• Supervision of other firms. How does the engagement partner supervise and evaluate the work of other accounting firms participating in the audit?
• Company awareness. Is company management—including investor relations, the office of the general counsel, and the corporate secretary—aware of the new Form AP disclosures?
• Response plans. How will investor relations address questions from investors, media, or others that may result from the new disclosures, and how will investor relations advise the audit committee of such questions?
• Social media impact. Has the audit firm considered whether the new disclosures will have an effect on its social media policy, and how has the firm communicated its policy with engagement partners?

—Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.