On February 11, the Securities and Exchange Commission issued a notice stating that the Public Company Accounting Oversight Board had withdrawn its rules on firm reporting and firm and engagement metrics. PCAOB rules and standards cannot take effect unless approved by the SEC. Therefore, the PCAOB’s decision to withdraw these rules from SEC consideration means that they are dead, at least for now. News accounts reported that the Board withdrew the rules after consultation with the SEC and that it would continue “to work with the Commission and all stakeholders to protect investors and increase transparency.”
In November 2024, the PCAOB adopted rules requiring registered accounting firms to disclose performance metrics regarding their larger audit engagements. These rules would have required firms that audit accelerated filers or large accelerated filers to publicly report eight metrics relating to specific audit engagements or to the firm’s overall audit practice (e.g., hours worked by senior professionals relative to more junior staff across all of the firm’s large accelerated and accelerated filer engagements and on each specific engagement). The Board also adopted expanded firm operational and financial condition reporting. Under the firm reporting rules, PCAOB-registered accounting firms would have been required to disclose certain financial information (e.g., aggregate fees billed to issuer clients), governance information (e.g., the names of the individuals holding certain leadership positions), network relationships, and material events impacting the firm’s audit services. See PCAOB Adopts Pared Back Engagement Performance Metrics and Audit Firm Reporting Rules, November 2024 Update.
The SEC published the firm reporting and performance metrics rules for comment in early December, and both rules attracted considerable comment. Opponents, including several large accounting firms, argued that the rules had been rushed to approval without a full analysis of their costs and benefits and that the performance metrics were potentially misleading. Investor advocates strongly supported the rules, arguing that they would provide audit committees and investors with useful information that would better inform decision-making and auditor evaluation. In conjunction with the change in the Presidential Administration, SEC Chair Gensler and Democratic Commissioner Lizárraga resigned from the Commission in January, and it seems unlikely that a majority of the remaining Commissioners would have approved the rules. See SEC Sidetracks PCAOB Engagement Metrics and Firm Reporting Rules, January 2025 Update.
While mandatory disclosure of the PCAOB’s metrics seems unlikely in the foreseeable future, audit committees are free to request any performance data they feel would be useful from their auditor.