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Accounting firms are trying to block new rules that would reveal how many hours are being worked by auditors of US public companies, and how much training and experience they have, saying the information risks being misinterpreted by investors.
The Public Company Accounting Oversight Board, which regulates the profession, approved the new disclosure requirements in November but they cannot go into force unless rubber stamped by the Securities and Exchange Commission, which has received a flurry of letters in opposition.
Shareholders are typically asked to ratify the appointment of a company’s auditor each year and investor groups have long advocated for standardised information to compare firms and inform their vote, according to the PCAOB.
A company’s auditor will have to disclose how much of the work is being done by senior partners versus more junior staff and how many years of experience the people in the team have, including experience auditing companies in that industry. The firm must also disclose the overall workload of senior professionals involved in a company’s audit, along with how much annual training is being given, among the eight different metrics.
Accounting firms say the metrics tell investors little about whether an audit is being done well and are likely to be misunderstood without additional context.
“The value of the metrics is speculative and may in fact confuse investors and other stakeholders, rather than benefit them,” Deloitte wrote in a letter to the SEC.
CohnReznick wrote: “No two firms are identical as are no two issuer audits.”
Several accounting firms argued disclosing the metrics to the audit committee of a company’s board would be better than making them public for shareholders because that is the committee that ultimately appoints the auditor.
The new disclosure rules are the latest PCAOB initiative to run into opposition from audit firms, which say the agency has become politicised and dismissive of their concerns under Joe Biden’s administration.
SEC chair Gary Gensler has said he will step down when Donald Trump is inaugurated on January 20, after which the regulator will be controlled by Republican commissioners who have signalled similar displeasure with the PCAOB’s rulemaking process.
Deloitte’s letter to the SEC said the speed with which the PCAOB is pushing through new rules was piling new costs on to audit firms and causing “stress in the system”, while the American Institute of CPAs, which represents the profession, said small and midsize firms would be tempted to stop auditing public companies all together.
The deadline for submitted comments on the new disclosure rules passed on Thursday but the SEC is yet to indicate when it will vote on whether to approve them.
