The Securities and Exchange Commission is seeking its own round of comments on rules approved by audit regulators to require the naming of engagement partners and other key participants in public company audits.

The Public Company Accounting Oversight Board adopted new rules in December that would require audit firms to complete a new filing with the PCAOB to provide the name of engagement partners on public company audit engagements. The filing also would require the names, locations, and extent of participation of other accounting firms that took part in the audit if their work made up 5 percent or more of the total audit hours.

PCAOB rules are subject to SEC approval before they can become final. As such, the SEC is seeking comments before making a final decision. The PCAOB intends for the new filing requirement to take effect for audit reports issued on or after Jan. 31, 2017, giving audit firms 35 days after the first filing of each audit report to complete the PCAOB filing.

Investors and other users of financial statements appealed to the PCAOB for years to pull back the curtain on public company audits and provide some transparency behind who performs the work. The new filing is meant to provide transparency about those key players in a public company audit, especially the engagement partner who is responsible for overseeing all aspects of the audit. The PCAOB plans to post the information on its website in a searchable format.

The PCAOB initially proposed requiring engagement partners to take pen in hand and sign audit reports, much the way Sarbanes-Oxley requires CEOs and CFOs to certify financial statements. Advocates of the signature requirement, including PCAOB Chairman James Doty, said they believed it would give auditors a heightened sense of responsibility for the audit opinion, and therefore a greater focus and diligence in discharging their duties.

Auditors and their legal advocates cried foul, contending that a signature on the audit report would unfairly subject the engagement partner to increased personal liability. The PCAOB throttled back the idea with a proposal to require only the name of the engagement partner in the audit report, not the engagement partner’s signature. Cries of increased liability persisted, and even two members of the PCAOB dissented, saying they saw no evidence that naming the engagement partner in the audit report would have any bearing on the quality of audit work.

Ultimately, the PCAOB settled for the separate filing to provide the transparency investors sought but without the legal concerns raised by the profession. The SEC is accepting comments on the rule through March 8.

The CFA Institute fired off its support soon after the SEC opened its comment process, appealing to the SEC to "approve without delay" the PCAOB rule. "Investors believe that requiring the disclosure of the engagement partner’s name will heighten their sense of accountability and responsibility and therefore improve audit quality," wrote CFA Institute representatives Sandra Peters and Ashwinpaul (Tony) Sondhi. "Enhanced audit quality is essential for investors and other stakeholders who rely on the independent audit."

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