Overview

On October 6, 2008, the U.S. Department of Treasury's Advisory Committee on the Auditing Profession ("ACAP") published a report detailing recommendations that would enhance the sustainability of a strong and vibrant public company auditing profession. One of the ACAP recommendations suggested that the Public Company Accounting Oversight Board (PCAOB), in consultation with various stakeholders, determine the feasibility of developing key indicators of audit quality and effectiveness and requiring auditing firms to publicly disclose these indicators and, assuming development and disclosure of indicators of audit quality are feasible, require the PCAOB to monitor these indicators.  

In 2015 the PCAOB issued a Concept Release on Audit Quality Indicators and sought comment on 28 potential indicators.

The purpose of this proposal is to provide reliable, consistent information that can improve investors’ ability to make informed decisions about investing their capital, ratifying the selection of auditors, and voting for members of the board of directors (including audit committee members). At the same time, it can improve audit committees’ ability to choose among and monitor the performance of auditors.

In brief, the Board’s proposal would: 

• Require reporting of firm-level metrics annually on a new Form FM, pursuant to a new Rule 2203C, Firm Metrics, for firms that serve as lead auditor for at least one issuer that is an “accelerated filer” or “large accelerated filer” under U.S. Securities and Exchange Commission (“SEC”) rules;

• Require reporting of engagement-level metrics for audits of accelerated filers and large accelerated filers on a revised Form AP; and

• Allow, but not require, limited narrative disclosures on both Form FM and Form AP to provide context and explanation for the required metrics.

For firm-level metrics, the Board is considering an effective date beginning October 1 of the year after the year in which SEC approval is obtained, with the first reporting period ending the following September 30. It is also considering a phased implementation period for both firm-level metrics and engagement-level metrics based on the number of audit reports issued in the relevant year.