backOn April 9, 2024, the PCAOB issued two proposals—the first regarding the public reporting of firm and engagement metrics and the second regarding firm reporting. The firm and engagement metrics proposal would require firms that audit at least one accelerated filer or larger accelerated filer to publicly report metrics relating to their audit practice. Specifically, the proposal would require disclosure of certain firm and engagement level metrics including (1) partner and manager involvement, (2) workload, (3) audit resources (firm-level), (4) experience of audit personnel, (5) industry experience of audit personnel, (6) retention and tenure, (7) audit hours and risk areas (engagement-level), (8) allocation of audit hours, (9) quality performance ratings and compensation (firm-level), (10) audit firms’ internal monitoring, and (11) restatement history (firm-level). Engagement level metrics would be reported for accelerated filers or large accelerated filers on a revised Form AP retitled, “Audit Participants and Metrics” and firm level metrics would be reported on a new Form FM. Both the Form FM and Form Audit Participants and Metrics would allow for narrative disclosures to provide explanation for the metrics disclosed.
The PCAOB’s firm reporting proposal would amend the PCAOB’s annual reporting (Form 2) and special reporting (Form 3) requirements. The proposal would require all firms to report additional financial information on Form 2 and would require the largest firms to submit confidential financial statements to the PCAOB. It would also require disclosure of additional information regarding firm governance and any network arrangements. With respect to Form 3 reporting, the proposal would shorten the reporting timeframe from 30 to 14 days and implement a confidential reporting requirement for events material to the firm. The proposal would also require confidential reporting of cybersecurity events within five business days and public disclosure of the firm’s cybersecurity policies and procedures.