PCAOB Releases Proposals Related to Standardizing Metric Disclosures and Enhancing Reporting Framework

The PCAOB has released a pair of proposals that are intended to “benefit investors, audit committees, and others by increasing audit firm transparency, bringing consistency to the disclosure and calculation of audit firm and engagement metrics, and helping the PCAOB conduct its oversight.”

Under the first proposal, Firm and Engagement Metrics, “PCAOB-registered public accounting firms that audit one or more issuers that qualify as an accelerated filer or large accelerated filer” would be required “to publicly report specified metrics relating to such audits and their audit practice.” Such metrics would include those related to “(1) partner and manager involvement, (2) workload, (3) audit resources, (4) experience of audit personnel, (5) industry experience of audit personnel, (6) retention and tenure, (7) audit hours and risk areas (engagement-level only), (8) allocation of audit hours, (9) quality performance ratings and compensation (firm-level only), (10) audit firms’ internal monitoring, and (11) restatement history (firm-level only).”

The second proposal, Firm Reporting, would enhance key aspects of the requirements related to the information registered public accounting firms report on the PCAOB’s Form 2 (i.e., the “Annual Report Form”) and Form 3 (i.e., the “Special Reporting Form”). Areas in which improvements would be made include (1) financial information, (2) audit firm governance information, (3) network information, (4) special reporting, and (5) cybersecurity.

Comments on both proposals are due by June 7, 2024. For more information, see the press release on the PCAOB’s Web site.