The Public Company Accounting Oversight Board voted unanimously during a meeting Tuesday to adopt new rules to provide investors with more information about who is participating in public company audits, including the name of the engagement partners and any other firms that participated in the audit.

The new rules and accompanying amendments to auditing standards require audit firms to disclose the names of each audit engagement partner as well as the names of other audit firms that participated in each audit. This can include firms in other countries that have been outsourced to help with the audit.

Under the final rules, auditors will be required to file a new PCAOB Form AP, Auditor Reporting of Certain Audit Participants, for each issuer audit, disclosing:

• The name of the engagement partner;

• The names, locations, and extent of participation of other accounting firms that took part in the audit, if their work constituted 5 percent or more of the total audit hours; and

• The number and aggregate extent of participation of all other accounting firms that took part in the audit whose individual participation was less than 5 percent of the engagement's total audit hours.

“Auditing is a business about reputation,” said PCAOB Chairman James R. Doty in a statement. “Transparency about the partner and firms involved should further incentivize auditors to organize audit teams conscientiously to give investors comfort that it is reliable.”

The standard filing deadline for Form AP will be 35 days after the date the auditor's report is first included in a document filed with the Securities and Exchange Commission. In the case of initial public offerings, the Form AP filing deadline will be 10 days after the auditor's report is first included in a document filed with the SEC.

"Form AP will provide investors and other financial statement users with the information they have continued to request—the name of the engagement partner and information about other accounting firms participating in the audit—in a single searchable database, giving the market valuable information, while responding to concerns raised by accounting firms and others about the unintended consequences of such a disclosure in the auditor's report," said PCAOB chief auditor and director of professional standards Martin F. Baumann.

The new rules are subject to approval by the SEC.

If the rules are approved by the SEC, the disclosure requirement for the engagement partner will be effective for auditor’s reports issued on or after Jan. 31, 2017, or three months after SEC approval of the final rules, whichever is later. For disclosure of other audit firms participating in the audit, the requirement will be effective for reports issued on or after June 30, 2017.

The new rules have been under development for six years. Acting on a recommendation of the Treasury Department's Advisory Committee on the Auditing Profession, the PCAOB began an analysis of this transparency issue in 2009 when it issued a concept release.

Audit transparency has been the subject of four rounds of public comment, and has also been discussed at several PCAOB Standing Advisory Group and Investor Advisory Group meetings. Further background and relevant documents on the initiative can be found on the PCAOB website on its own page: Docket 029.

Over the years, the PCAOB backed away from an earlier proposal to have the lead engagement partner actually sign off on the audit. “For me, this issue has always been more about improving audit quality, which is not where it should be, by enhancing and influencing a leader’s sense of individual accountability and acceptance of responsibility for a team effort he or she has led by signing his or her name to a most commonly reviewed report, as opposed to simply being identified in a newly developed form,” said PCAOB board member Steven Harris. “However, I understand that reasonable people may agree to disagree, which is why I support today’s compromise which will result in the creation of a new standardized form—the Form AP, the ‘AP’ standing for ‘Audit Participants.’”

PCAOB staff plans to publish guidance in 2016 for firms relating to compliance with the reporting requirements of Form AP. A fact sheet on Form AP also is available.

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