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PCAOB Issues Guidance on Form AP to Address Common Deficiencies

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The Public Company Accounting Oversight Board (PCAOB) has released a new publication called “Audit Focus: Form AP,” which serves as a guide to audit firms on how to properly complete Form AP.

Audit Focus is a PCAOB publication series that offers easy-to-digest information to auditors.

According to PCAOB, for every audit report that they issue for a public company, PCAOB-registered audit firms must file a Form AP. In this form, audit firms disclose key information that is specific to the audit. This includes the engagement partner who is responsible for the audit, details regarding the audit report and other accounting firms' participation in the audit.

These disclosures assist investors, audit committees as well as other stakeholders understand exactly who has taken part in public company audits and the work distribution among the participants.

The Audit Focus reported that PCAOB staff are still finding a large number of deficiencies related to auditors' Form AP filings. These include, among other errors, inaccurately reporting of an accounting firm's total audit hours, omitting or incorrectly reporting the percentage of total audit hours contributed by a firm or giving the incorrect audit report date.

This edition of Audit Focus shares:

• Key reminders for auditors from the PCAOB rules, standards and staff guidance on Form AP;

• PCAOB staff’s perspectives on the common deficiencies; and
• Good practices that the staff has observed including structured templates use, guidance on how to complete the templates or policies requiring a review of Form AP information to ensure accuracy and completeness.

Accounting Today said that the PCAOB’s focus on Form AP compliance follows recent enforcement actions against nine KPMG affiliates across multiple countries, resulting in $3.3 million in fines.

While the PCAOB views these sanctions as necessary for maintaining audit quality, board member Christina Ho criticized the penalties in a March 11 LinkedIn post, arguing they were excess and likened Form AP violations to parking tickets, according to Accounting Today.