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Pcaob - Name Lead Partner on Engagements

In: Business and Management

Submitted By raqveloso
Words 671
Pages 3
PCAOB and its proposal to disclose the name of the lead audit partners in the report has facing mixed opinions from financial experts and public accounting firms. The proposal was suppose to be finalized in September of 2014 but is has been pushed back as everything else seems to be when dealing with high profitable companies (Big 4 in this case).
As we further analyze this possible new rule, pros and cons arise and it is important to address we can see more pros if we looking at the investor’s point of view and cons if we put ourselves on the shoes of a public accounting firm.
Let’s start by discussing the positive points of having the name of the lead partner on audit reports. First and foremost, that will be someone to be hold accountable for the reports. If a severe mistake is made, the partner in charge will have to explain the reason why this happened. Great news for investors right? Definitely. Now they will have someone to blame if they lose money. By holding partners accountable the audits can be highly improved. Not only the partner will take a closer look on what was done but will question them on how comfortable they are about putting their names on the audits. Therefore investors could rest assured of the quality and reliability of the reports.
Another pro regarding this proposal is the transparency in which the accounting profession would be. In an industry where reputation is perhaps the most important asset of a company, being transparent and up front about the work can be seen as a huge plus for accountants. The profession has been suffering with integrity and due care issues since incidents like Enron, WorldCom and Tyco took place in past years. This would show that despite what happens in the past with some auditors, there are honest professionals that are proud of their work and not afraid of to take responsibility for their acts.
Switching focus from investors’ point of view to the dynamic of accounting firms, we can also name pros if this rule is to happen. There would be a healthy competition among partners and the firms and investors would be able to keep track of partners’ work.
Taking a closer look at the cons regarding this situation, we can see an increased liability faced by partners. They would be signing their names after all and it is almost impossible they will look over every single detail of an audit and assure everything was done properly. That could be situations where they would be blamed for something they did not do or did not know about even after looking over the team’s work. Another negative point would be the potential increase in fees for the firms that hire the auditors. It is most likely the partners would have to go over more thoroughly the audits therefore charging more hours to do so.
Some partners may also see this regulation as a stressful task. The healthy competition mentioned above may not be as healthy and cause some tense between partners. We can also possible see change of partners on engagements as well as more often change in teams and management per engagement. All of which could cause tension between works and hurt the company’s atmosphere.
After all the pros and cons discussed, I believe this new proposal should be implemented and rather sooner than later. There is nothing to fear from a partner prospective if he or she has confidence over the work they provide the companies they serve with. If anything, they should be happy to be named for good work. This rule would help the “natural selection” of partners since I believe many would be looking for another job when this rule is implemented. Why not to add transparency and reliability on our work? The profession has lots to gain with this rule. So do the investors and the general public. Plus, if has worked in the UK why wouldn’t work here?

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