Memorandum
Subject: Mandatory disclosure of the auditor’s name on the audited company’s annual
report
The new rule that will require accounting firms to disclose the name of the auditor on the
audited company’s annual report was discussed in the Wall Street Journal article titled
“Regulators, Accounting Firms Spar Over Rule” dated September 29, 2014. This new
requirement is expecting a final approval from The Public Company Accounting Oversight
Board (PCAOB), the government’s audit regulator, in the next few weeks. It is focused on
making the auditors more accountable for the reports and giving the investors additional
information they might be interested in.
The PCAOB encourages on the names being disclosed on annual audit report that the
accounting firm issues. It suggests a mandatory disclosure on the 10-K report, in the
auditor’s opinion section. However, the big accounting firms are asking for the disclosure
to take place on a separate report filed with the PCAOB – Form 2. They argue that the
disclosure on annual reports will put their audit partners under the risk of multiple lawsuits
and other complications. The location of the disclosure is very important, since it is easier
for investors to access the audited company’s annual report rather than the Form 2 of the
accounting firm. The director of financial reporting policy for the CFA institute Matt
Waldron and a former Securities and Exchange Commission Chairman Arthur Levitt agree
that displaying the auditor’s name on the 10-K report will make the information more
