backand On November 21, 2024, the PCAOB adopted a set of new requirements regarding public reporting of standardized firm and engagement metrics, as well as a separate but complementary set of amendments regarding the PCAOB reporting framework. These amendments are subject to approval by the SEC.
PCAOB-registered public accounting firms that audit one or more issuers that qualify as an accelerated filer or large accelerated filer will be required to publicly report specified metrics relating to such audits and their audit practices. These metrics cover eight areas: partner and manager involvement, workload, training hours for audit personnel, experience of audit personnel, industry experience, retention of audit personnel (firm-level only), allocation of audit hours, and restatement history (firm-level only). Reporting of firm-level metrics will be required annually on Form FM, while reporting of engagement-level metrics will be required on a revised Form AP. PCAOB Chair Erica Y. Williams delivered remarks at the PCAOB Open Board Meeting on November 21, 2024, where she commented that these metrics are already disclosed by almost all of the top eight Global Network Firms in some manner. She added that these requirements will “lead to reliability and comparability of the metrics to be disclosed by requiring the calculations be consistently applied across firms.” The metrics will also be maintained centrally on the PCAOB website.
Regarding firm reporting, the amendments will enhance the required current reporting of information by registered firms on the PCAOB’s public Annual Report Form (“Form 2”), and the Special Reporting Form (“Form 3”). The changes include requirements for firms to report additional information regarding fees, leadership and governance, network relationships, and cybersecurity events. Additionally, annually inspected firms must report events material to the firm’s organization, operations, liquidity, and financial resources. Firms must also submit updated statements of the firm’s quality control policies and procedures pursuant to the PCAOB’s new quality control standard, as covered in our September 13, 2024 bulletin. Chair Williams delivered remarks on these amendments at the Open Board Meeting, noting that “these changes will arm investors and audit committee members with even more information to make informed decisions about audit firms and will enable the PCAOB to better execute its investor protection mission.”
The PCAOB’s announcement is available here. The Adopting Release for the Firm and Engagement Metrics is available here. The Adopting Release for Firm Reporting is available here. Chair Williams’ prepared remarks regarding the Firm and Engagement Metrics are available here. Chair Williams’ prepared remarks regarding Firm Reporting are available here.