On 9 May 2016, the SEC approved the proposal of the Public Company Accounting Oversight Board (the "PCAOB") to adopt new rules relating to accounting firms that participate in issuer audits. Under the proposed rules, a registered public accounting firm, when issuing audit reports for an issuer, must file a report with the PCAOB that includes the name of the engagement partner, as well as certain identifying information about the auditing firm and information relating to the level of the firm's participation in the audit. An accounting firm would be subject to the proposed rule if it has participated in at least 5% of the total audit hours of an issuer's audit. The accounting firm must inform the PCAOB within 35 days of the first auditor's report to be included in a document filed with the SEC and within 10 days after the auditor's report is first included in a registration statement filed with the SEC. The proposed rule applies to the audits of all SEC-registered issuers.
For further details on the proposed rule, please see the PCAOB release at:
https://pcaobus.org//Rulemaking/Docket034/Release-2016-003-ARM.pdf
In addition, on 11 May 2016, the PCAOB issued a re-proposal regarding its auditing standard to supersede the standard in place since 2013. Under this re-proposal, in audits conducted under PCAOB standards, any critical audit matter must be communicated in the auditor's report. A critical audit matter is any matter that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the financial statements, and (ii) involved especially challenging, subjective or complex auditor judgment. With their inclusion, the PCAOB intends to give investors a better understanding of the methods, considerations and processes an auditor has employed in an audit which may be affected by that auditor's professional judgment and experience with complex matters.
For further details on the re-proposal regarding auditing standards, please see the PCAOB's release at:
https://pcaobus.org/Rulemaking/Docket034/Release-2016-003-ARM.pdf
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