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State Board Report

December 2013

In 2005 the Public Company Accounting Oversight Board’s Standing Advisory Committee began discussing the need for disclosing the name of the audit partner in the auditor’s report. After much study, analysis and discussion, the PCAOB has again released for public comment amendments to the PCAOB’s auditing standards that would require the disclosure in the auditor’s report of the engagement partner for the most recent period and other firms that participated in the audit, including the extent of participation.

“I look forward to a new round of public comment,” PCAOB Chairman James R. Doty stated at the PCAOB’s meeting on December 4. “There is a robust record on this proposal. The questions accompanying the re-proposal are intended to encourage commenters to think deeply about both their own views as well as opposing views expressed in earlier comments, and to engage constructively.”

PCAOB member Jeanette M. Franzel commented: “I am pleased that we are today considering a re-proposal instead of an adopting release, as originally planned earlier this year. In my view, a number of fundamental questions remain to be addressed before we can reach a conclusion about any final standard in this area.” Similarly, PCAOB member Jay D. Hanson told the December 4 meeting: “While I support gathering additional feedback on our possible courses of action, I do have strong reservations about today’s proposal.” PCAOB Chairman Doty and PCAOB members Lewis H. Ferguson and Steven B. Harris voiced their support for the proposal.

The re-proposed amendments would require disclosure in the auditor’s report of: (1) the name of the engagement partner who led the audit for the most recent period, and (2) the names, locations, and extent of participation (as a percentage of the total audit hours) of other public accounting firms that took part in the audit, and the locations and extent of participation of other persons (whether an individual or a company) not employed by the auditor who performed procedures on the audit. The staff believes information on such other firms would be particularly helpful to investors when that firm is not inspected by the PCAOB, such as those from countries that will not allow such inspections.

At the PCAOB’s December 4 meeting they also approved amendments to conform the PCAOB’s rules and forms to the Dodd-Frank Act and the SEC’s Rule 17a-5. Chairman Doty explained, “Although the primary goal is to make the PCAOB’s rules apply to audits of brokers and dealers, the amendments before the Board today will conform the Board’s rules to other significant provisions of the Dodd-Frank Act. These include reflecting in our rules the Board’s authority to share certain otherwise confidential documents with self-regulatory organizations and clarifying the Board’s enforcement jurisdiction over persons formerly associated with registered public accounting firms.”

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