AICPA asks SEC to reject PCAOB rules that pose 'significant challenges'
December 21, 2024
An AICPA comment letter sent Thursday asked the SEC to not approve PCAOB final rules related to firm and engagement metrics and firm reporting.
"We believe the recently adopted PCAOB rules will pose significant challenges for accounting firms, especially mid-sized and smaller firms, and may not achieve the intended benefits of improved oversight and audit quality," Sue Coffey, CPA, CGMA, the AICPA's CEO–Public Accounting, wrote in the comment letter. "Therefore, we respectfully urge the SEC to refrain from approving these rules. Instead, alternative approaches that better balance transparency, cost, and the needs of audit committees, while continuing to support the quality of audit services and choice of audit providers available to perform public company audits and serve the public interest should be pursued, rather than introducing potentially detrimental unproven regulations."
The PCAOB adopted its Firm and Engagement Metrics rule and its Firm Reporting rule on Nov. 24, and sent both to the SEC, which oversees the PCAOB, for final approval.
"As we expressed to the PCAOB in our comment letter dated June 18, 2024, the recently adopted rules mandate the disclosure of performance metrics for audits of accelerated and large accelerated filers, and expanded operational and financial condition reporting by registered accounting firms," Coffey wrote in Thursday's letter. "These rules will disproportionately affect smaller and medium-sized audit firms.
"We believe these rules will have unintended negative consequences, including driving small and medium-sized firms out of the public company auditing practice. This would result in fewer firms performing such audits which are critically important for smaller and medium size companies seeking to access the U.S. capital markets. Consequently, companies will face greater challenges and higher costs in meeting necessary audit requirements to access the U.S. capital markets."
Under the Firm and Engagement Metrics rule, 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 eight engagement and firm-level metrics relating to such audits and their audit practices:
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
Restatement history (firm-level only)
The Firm Reporting rule amends current reporting requirements on the PCAOB's Annual Report Form (Form 2) and Special Reporting Form (Form 3) related to financial and governance information, network relationships, special reporting, and cybersecurity.
In addition, a new form will require any firm registered with the PCAOB prior to Dec. 15, 2025 – the effective date of the PCAOB's new quality control standard – to submit an updated statement of the firm's quality control policies and procedures pursuant to the standard.
[Journal of Accountancy]
