PCAOB proposal on firm and engagement metrics
Hot Topic | July 2024
The proposal sets standardized metrics that certain firms would be required to publicly report.
The PCAOB has approved a proposal to standardize the disclosure of firm and engagement metrics. For firms meeting certain criteria, firm-level metrics would be reported annually on a new Form FM (Firm Metrics). Reporting of engagement-level metrics for audits of accelerated filers and large accelerated filers would happen through a revised and renamed Form AP (Audit Participants and Metrics).
Our Hot Topic captures the perspectives expressed by KPMG and other key stakeholder groups.
Applicability
- Public companies
Relevant dates
- April 9, 2024 – proposal issued
- June 7, 2024 – comment period ended
Key impacts
On April 9, 2024, the PCAOB approved a new proposal to standardize public disclosure of firm and engagement metrics. The metrics specified in the proposal relate to (1) audit effort and hour allocations, (2) auditor workload and retention, (3) auditor experience and (4) other performance and monitoring metrics. This Hot Topic provides KPMG’s initial reactions and summarizes reactions from investors and audit committee members on the Proposal.
In our comment letter, we also discussed operational challenges, the importance of confidentiality, and the need for implementation support infrastructure. We cautioned against metrics that do not necessarily correlate with audit quality and recommended a principles-based framework for identifying relevant metrics with the audit committee’s feedback that can adapt to changes in the profession, particularly given the increasing role of technology in the audit. We also noted that the compliance costs are expected to be significant.
The PCAOB’s next Board action is pending analysis of the comment letters submitted on the proposal. This timeline will depend on the Board’s deliberation of the feedback and the extent of changes made to the proposal.
Audit quality is foundational to protecting investors and maintaining public trust in the capital markets. We have regular and responsive dialogue on our system of quality control with audit committees, boards and management teams. Additionally, in our Audit Quality and Transparency Reports, we share details with a broader set of stakeholders that demonstrates our dedication to transparency - including both qualitative and quantitative decision-useful information.
Christian Peo
National Managing Partner, Audit Quality and Professional Practice
Report contents
- Introduction
- Our initial reactions
- What did accounting firms, investors and audit committees say?
- Where that leaves us
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PCAOB proposal on firm and engagement metrics
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