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PCAOB proposes far-reaching requirements for audit firm reporting

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The Public Company Accounting Oversight Board voted to propose an extensive set of new reporting requirements to impose on auditing firms during a meeting Tuesday, even as the auditing overseer is facing pushback over some of its earlier proposed rules on noncompliance with laws and regulations.

The new requirements come in the form of two related proposals, one on firm and engagement metrics and the other on firm reporting. The Firm and Engagement Metrics proposal involves a standardized set of 11 metric areas for every firm that audits at least one public company classified as either an “accelerated filer” or a “large accelerated filer” to disclose every year.

They include information about firms’ overall audit practice, such as how partners’ quality performance ratings affect their compensation, and information about individual engagements, for example the time incurred by partners and managers on the engagement team related to areas of significant risks, critical accounting policies and practices, and critical accounting estimates.

PCAOB logo - office - NEW 2022

“Collectively, these metrics would help investors make more informed decisions about how they invest their money, and they would provide audit committees with consistent data to analyze and compare as they are selecting and monitoring audit firms, ” said the PCAOB chair, Erica Williams, in a statement during Tuesday’s open meeting. “Firms could use these standardized metrics about themselves and their peers to assist in designing, implementing, monitoring and remediating their systems of quality control.”

She acknowledged that the PCAOB could also benefit from having such information on hand in a consistent, comparable format for use in its inspections program and standard-setting initiatives.

The proposal, if adopted, would require PCAOB-registered firms that audit one or more accelerated filers or large accelerated filers to publicly report specified metrics relating to such audits and their audit practice.

The proposal envisions standardized firm- and engagement-level metrics to create a data set for investors and other stakeholders for analysis and comparison. The proposed metrics cover:

  • Partner and manager involvement;
  • Workload;
  • Audit resources;
  • Experience of audit personnel;
  • Industry experience of audit personnel;
  • Retention and tenure;
  • Audit hours and risk areas (engagement-level only);
  • Allocation of audit hours;
  • Quality performance ratings and compensation (firm-level only);
  • Audit firms’ internal monitoring; and,
  • Restatement history (firm-level only).

The proposal would require reporting of firm-level metrics annually on a new Form FM, for firms that serve as the lead auditor for at least one accelerated filer or large accelerated filer. Reporting of engagement-level metrics for audits of accelerated filers and large accelerated filers would be done on a revised Form AP, which would be renamed “Audit Participants and Metrics.” The proposal would allow, but not require, limited narrative disclosures on both Form FM and Form AP to provide context and explanation for the required metrics.

Firm reporting proposal

The other proposal, on firm reporting, covers five main areas, and would require an extensive amount of new reporting by firms. The first area is financial information. All PCAOB-registered firms would need to report actual dollar amounts of various fee categories, as opposed to the percentages that are currently required. The new requirements would also provide more disaggregated fee information that is more consistent and easier to compare across firms. 

“Fee reporting would help investors, audit committees and other stakeholders better understand how a firm’s audit practice fits into its overall business and the incentives that may influence resource allocation within the firms,” said Williams.

The largest registered firms would also need to confidentially submit their financial statements to the PCAOB.

“These firms play an essential role in our capital markets and overall economy,” said Williams. “Their financial stability impacts their ability to invest in resources necessary to ensure quality audits and to withstand various financial events.”

Another area of disclosure involves audit firm governance information. The proposal would require all PCAOB-registered firms to report more public information about their leadership, legal structure, ownership and other governance information, including information on the structures and policies that would govern a change in the form of the organization.

The PCAOB also wants to find out more information about firm networks, such as the Big Four. The proposal would require a more detailed public description of firms’ network arrangements, to provide more insight about the accountability and oversight structure the firm is subject to, in addition to the resources the firm has available to devote to its audit work.

In addition, the PCAOB wants a shorter timeline on special reporting of events such as whether a firm is the subject of a lawsuit or regulatory action. The proposal would shorten the timeframe for special reporting from 30 days to 14 days, or more promptly as warranted. Some of the information would need to be made available to investors, audit committees, and the PCAOB inspection and investigation staff in a timelier manner.

Firms would also need to provide more detailed information about any financial issues they are facing, as well as upcoming mergers, acquisitions and reorganizations.

“In addition to the existing special reporting requirements, the proposal would add a new confidential special reporting requirement for events material to a firm’s organization, operations, liquidity or financial resources, or provision of audit services,” said Williams. “These events have the potential to significantly impact audit quality and investor protection, yet they are not covered under the current standard. For example, the additional requirement might include a determination that there is substantial doubt about the firm’s ability to continue as a going concern, or a planned or anticipated acquisition of the firm, change in control, or restructuring.”

Cybersecurity issues would also need to be disclosed to the PCAOB.

“Cybersecurity threats are among the greatest risks to many businesses in today’s world, and audit firms are particularly attractive targets,” said Williams. “The proposal would require public reporting of a brief description of the firm’s policies and procedures, if any, to identify and manage cybersecurity risks, and confidential reporting of significant cybersecurity events to the PCAOB within five business days.”

The firm reporting proposal would, if adopted, amend the board’s annual and special reporting requirements to facilitate the disclosure of more complete, standardized and timely information by registered firms. Much of the information would be disclosed publicly, but some would be available only to the PCAOB for oversight purposes.

The board is proposing to enhance the required reporting of information by registered firms on its public Annual Report Form, also known as Form 2, and the Special Reporting Form, also known as Form 3, in several key areas.

  1. Financial information: Under the proposal, all registered firms would report additional fee information on the public annual report form. The largest registered firms would also be required to confidentially submit financial statements annually to the PCAOB.
  2. Audit firm governance information: The proposal would require all registered firms to report on the public annual report form additional information regarding their leadership, legal structure, ownership and other governance information, including information that would govern a change in the form of the organization.
  3. Network information: The proposal would require on the public annual firm report a more detailed description of any network arrangement to which a registered firm is subject, including describing the legal and ownership structure of the network, network-related financial obligations, information-sharing arrangements between the network and registered firm, and network governing boards or individuals to which the registered firm is accountable.
  4. Special reporting: The proposal would shorten the timeframe for all reporting on the special reporting form from 30 days to 14 days (or more promptly as warranted) and implement a new confidential special reporting requirement for events material to a firm’s organization, operations, liquidity or financial resource, or provision of audit services.
  5. Cybersecurity: The proposal would require confidential reporting on the special reporting form of significant cybersecurity events within five business days and periodic public reporting of a brief description of the firm’s policies and procedures, if any, to identify and manage cybersecurity risks.

Separately, the proposal includes amendments to facilitate a provision under the QC 1000 proposal that would require firms to report their revised quality control policies and procedures if QC 1000 were to be adopted.
The board’s thoughts

PCAOB board member Christina Ho voted in support of the firm and engagement metrics proposal but against the firm reporting proposal. While she voiced cautious support of the firm and engagement metrics proposal, she also had some questions about it.

“The proposal does not articulate clearly what the PCAOB is going to do with all this information,” said Ho. “We are proposing to mandate that firms submit this information by the respective due dates, but what are the PCAOB’s due dates to publish? Will we analyze the information we collect and share our analysis with the public?”

She was more critical of the firm reporting proposal.

“I am profoundly worried that the board’s apparent zeal to impose, in each new proposed standard or rule, new burdens on firms, without sufficient tailoring and without quantifying the estimated burdens, may end up breaking the public company auditing profession’s back, particularly for small firms,” said Ho. “If we ‘break’ the profession in the name of investor protection, are we really protecting investors?”

Another board member, George Botic, supported the firm and engagement metrics proposal.

“My consideration of this proposal has led me to believe that the ultimate value of many of the proposed metrics would likely be realized over a longer time horizon,” he said. “Trends across and within both firms and engagements may emerge. Such trends could provide not only information for the acquirors of audit services and the users of financial statements, but also direction to the academic community about potential research areas, which in turn could provide further insights into the overall audit market and also assist our work.”

He also voted in support of the firm reporting proposal.

“As part of our ongoing oversight activities, we have received important information about firms’ operations on a voluntary ad-hoc basis in which firms may call and ‘alert’ various PCAOB staff of pending matters or firm actions,” said Botic. “Having been the recipient of many of these voluntary calls, I can confirm how helpful this information was. It allowed the staff to be more informed and able to respond and ask further probing questions and perform other oversight procedures, as warranted. This proposal takes the insights gained from those interactions and standardizes them to allow for comparable and timely collection that facilitates access and efficient sharing with offices and staff across the PCAOB.”

The PCAOB is asking for comments on both proposals by June 7 and noted that the basic framework for its annual and special reporting requirements has not been substantively reevaluated since its adoption in 2008. 

Separately on Tuesday, the PCAOB announced a settled disciplinary order against a Singapore-based firm, Pan-China Singapore PAC, for quality control violations and imposed a $75,000 penalty.

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Stop settling: A young CPA’s guide to finding your industry niche

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As Mahatma Gandhi famously said, “If you don’t ask, you don’t get it.” I bring this up because young accountants (and soon-to-be accounting graduates) are increasingly telling me they must take any assignment their firm gives them. 

I understand not wanting to make “waves” when you’re just starting your career. But if you don’t have a clear vision of your future self as a CPA, then you’re never going to get there. And when you continually settle, you could be on the fast-track to burn out. Tri-Merit’s CPA Career Satisfaction Survey, among other studies, have shown that burnout is not only caused by long hours and constant stress. It can also be caused by boredom or just feeling increasingly disengaged from your job and your colleagues.

In a perfect world, your company or firm should collaborate with you to align your work with your career goals. This is huge for recruiting and retaining top talent like you. Unfortunately, it doesn’t always work out that way. That means you need to take charge of controlling your career and for being your own advocate. That means getting clear about your passions. 

Identifying your passions

I’ve had a lifelong love affair with entertainment, gaming and numbers. As a child I always claimed the role of banker when playing Monopoly. Growing up, I loved playing video games with my siblings too, whether it was Mario Kart battles or teaming up in co-op adventures. Outside, we spent hours playing football and basketball where competition and strategy were just as exciting. That drive for competition and the thrill of winning — whether in video games or sports — fueled my love for gaming.

Watching characters evolve and worlds unfold has always inspired me. It’s part of what drives my passion for connecting finance to these industries. In many ways, a financial statement is a big puzzle to solve.

I started my career at the Big Four firm where I had interned in college. I was thrilled to have a job at such a prestigious firm even though I knew my first stop — auditing for a large retail chain in Florida — was not where I wanted to spend my career. To lay the groundwork for a transfer to a more interesting area, I made sure I was always one of our group’s strongest performers and used my spare time to scour the firm’s website to identify the partners and managers in charge of the media and entertainment practice. I stayed up on current events in the entertainment industry and even took CPE courses to learn more about accounting issues and nuances of the media and entertainment business.

Once the retail audit in Florida was done, I reached out to my resource director and asked if she knew of any job openings in the media and entertainment practice. The firm had NBC as a client in Los Angeles and New York. It had just opened up a smaller audit for the Puerto Rico division that was headed up in Florida. I liked my chances. But the retail group needed someone year-round in my role. Since I was one of the strongest performers, they didn’t want me to go. So, I kept working hard but never stopped pushing for a transfer and was finally offered an audit assignment for NBC New York. Right before I accepted the transfer, an older colleague I was close with told me that if I really wanted a career as an entertainment industry accountant, then I would have to be in Los Angeles where all the action was. Plus, I didn’t want to go back to the cold weather after my time in Florida.

Instead of moving to New York, I kept looking for opportunities on the West Coast. Eventually, a recruiter told me about Siegried, a nationwide leadership and financial advisory firm with a growing presence in the Los Angeles entertainment market. I flew out for a weekend interview. I was hired soon thereafter as a 23-year-old senior accountant and moved to LA. 

I quickly got exposure to entertainment industry leaders such as Caesars and Fox. The Fox assignment was especially rewarding as we had to create 16 new financial statements from scratch for different parts of the company that never had their own financial statements before.

From Siegfried, I moved on to Netflix and ITV America before starting my own firm, KCK CPA, which provides accounting and financial advisory services to entertainment and cryptocurrency companies. I had always been interested in entrepreneurship, so going out on my own felt like a natural career progression. I even started CPAcon, a conference designed to help change the narrative in accounting and to bring excitement, competition and community through gamified learning into the profession. CPAcon is essentially the accounting industry’s Super Bowl!

5 keys to charting your ideal career path

1. Clarify your goals: Understand why you’re passionate about an industry and how it aligns with your skills and career aspirations. Even if you don’t know what your true passion in life is, that’s OK. What types of things do you find yourself doing when nobody is forcing you to do it? What energizes you? For example, if you like shopping, you could look into career opportunities in retail. If you love cooking and hosting dinner parties, you could consider the restaurant or hospitality industry. Try to get part-time jobs or internships in those industries, so you’ll get a feel for which parts of the industry you like and which parts you don’t like before making a full-time commitment there.

2. Do your research: Learn about your current (or prospective) firm’s involvement in your desired industry. The web and AI have made it incredibly easy to do research on targeted companies and industries. But you must also get out and talk to people in those industries and ask them what their experiences have been like. Also talk to the managers and their direct reports at your firm who are working in your targeted industry. They’re tasked with helping to develop talent and so they’ll appreciate knowing what you’re really interested in and think you might be good at. Lean into face-to-face interaction, even if that makes you uncomfortable at first.

3. Show your value: Highlight your performance and explain how your interests could benefit the firm, such as bringing fresh perspectives or expanding the client base. There’s always a need for fresh ideas and approaches in our profession. Accounting firms are prone to SALY (Same as Last Year) thinking. But you’re young. You can bring in a fresh take such as: “Hey, I understand how you guys do this. But I learned this: x, y and z. Do you think this would be interesting to you?” They might not agree, but it shows you have an interest in their business and that you’re taking the initiative to learn. That will help you stand out.

4. Have a thoughtful conversation: Schedule a meeting with the managers and resource directors at your firm to discuss your career development, share your interests and propose actionable steps, like taking on relevant projects or clients. They usually have control over your schedule and how your time is allocated at the firm. Make them your allies. 

5. Be patient but persistent: The influencers you’re trying to reach are busy people and may not have the same sense of urgency as you do. This is one of the hardest lessons for young professionals to learn. Just because you sent someone a text or email doesn’t mean they’re going to drop everything to read it. You must keep reminding them who you are and what you’re seeking. You may need to follow up every week or two (put it in your calendar or reminder tool) to keep the heat on. Don’t worry about being too pushy —- they’ll let you know if you’re over-stepping. More often than not, they’ll appreciate the courteous, professional reminders. 

No one knows you better than yourself and it’s on you — not your employer — to chart your most fulfilling career path. Be your own advocate. My journey from retail auditing to entertainment industry accounting wasn’t just luck — it was the result of careful planning, persistent networking and a clear vision of where I wanted to go. You can too.

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Wealthy tax cheats set to benefit from Trump plans to halve IRS

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Cutting IRS staffing in half over the next 10 months would mean less help and longer waits for many U.S. taxpayers and increase the risk that wealthy tax cheats escape paying what they owe.

It also would leave the Internal Revenue Service with its smallest workforce since at least the 1960s, according to official IRS data.

The Trump administration plans to cut the number of IRS employees in half by the end of the year, Bloomberg Tax reported Tuesday. But gutting the workforce so dramatically and so quickly could mean slower refunds and processing of returns for many Americans, taking the agency back to the difficulties it experienced before an infusion of tens of billions in new funding under the 2022 tax-and-climate law known as the Inflation Reduction Act, according to tax professionals.

“This strikes me as foolhardy, unless your intention is to bankrupt the US government by essentially making tax-paying optional,” said Kimberly Clausing, a tax law professor at the University of California at Los Angeles and a former Treasury Department official under President Joe Biden. “I think the approach they’re following so far seems to be taking a wrecking ball to the system without concern for the consequences.”

The planned job cuts in an IRS workforce that in January was roughly 100,000 would come across the agency. They would include attrition, layoffs, and two already-announced efforts: the firing of probationary employees, and Trump adviser Elon Musk’s “deferred resignation” plan, under which some employees have resigned in exchange for getting paid through this September.

About 12,000 employees have already left the agency under those two efforts.

“The IRS needs more people, not less,” said Lee Meyercord, a partner at Holland & Knight. Job cuts like these “will reverse the dramatic improvement in recent years in taxpayer service, collection, and enforcement.”

Tax cheats “will sleep better at night,” Clausing said, anticipating that audits of wealthy people would be more drawn-out, less efficient, and less probing when they happen at all.

Structure changes, uncertainty

Not everyone has the same view of the workforce changes.

Halving staff numbers “will force the IRS to rethink how it’s structured and how it operates,” said David Kautter, federal specialty tax leader at RSM US LLP and a former Treasury Department tax official during President Donald Trump’s first term. The administration still wants to collect taxes, but the huge cuts are an expression of the idea that the IRS “needs to change” and “do something different,” he said.

But large staffing cuts would mean longer waits for taxpayers to resolve disputes with the IRS, said Nikole Flax, a principal at PricewaterhouseCoopers and a former commissioner of the IRS’s Large Business & International division.

There would be “less opportunities for tax certainty” if dispute-resolution programs like appeals, fast-track settlement and advance pricing agreements become less accessible to taxpayers, she said.

Longer waits on dispute resolution would also cost companies money, in the form of continuing legal fees and interest that keeps accruing on their tax bills.

‘Distrust of the government’

Which areas will feel the greatest impact will depend on exactly where the job cuts ultimately are made, said Monte Jackel, principal at Jackel Tax Law and a former IRS official. Whether they’re from employees generally or focused on IRS divisions such as LB&I and the Office of Chief Counsel; whether they’re primarily in Washington or outside Washington.

“I don’t know how they’re going to prioritize it,” Jackel said.

The consequences of the job cuts could be long-lasting, said Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center.

Next year’s filing season was already looking “shaky” anyway, she said, because IRS funding via the Inflation Reduction Act is supposed to dry up by the end of this year, and layoffs will only deepen the problems with IRS performance.

“In combination, it adds to the distrust of the government and it creates further vulnerabilities in the IRS’s ability to administer the tax code,” Holtzblatt said.

The threat of major job cuts has already decimated morale among IRS employees, said David Carrone, an IRS revenue agent and a chapter president for the National Treasury Employees Union in Arkansas and Louisiana.

“Your whole routine is gone. You’re waiting for that tap on your shoulder,” Carrone said. Employees continue to do their work, he said, but “the reality of the situation is everybody’s head is spinning.”

Kautter said the job cuts will spur the agency to adopt technology rapidly to carry out its work.

But improved IRS technology isn’t a substitute for the people needed to conduct complex audits of wealthy people’s complicated returns that are needed to force them to pay up, Carrone said.

“The computer can’t catch those.”

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Aprio acquires JMS Advisory Group

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Aprio, a Top 25 Firm based in Atlanta, has acquired JMS Advisory Group, a firm that specializes in unclaimed property compliance and escheat process development, also based in Atlanta 

Financial terms of the deal were not disclosed. Aprio ranked No. 24 on Accounting Today’s just released 2025 list of the Top 100 Firms, with $485.34 million in annual revenue. JMS Advisory Group is bringing 12 team members and two partners to Aprio, which currently has over 2,100 team members and 205 partners. 

JMS was founded in 2006 and helps clients mitigate risk and capitalize on opportunities through managed unclaimed property compliance. The team includes attorneys, CPAs, CFEs and others.

JMS has a wide range of clients, including enterprise companies, financial institutions, credit unions, insurance companies, hospitality and health care organizations.

“As Aprio continues its rapid growth, we are committed to expanding our services to meet the evolving needs of our clients,” said Aprio CEO Richard Kopelman in a statement Tuesday. “The addition of JMS gives us the opportunity to continue strengthening our position as a future-focused advisory firm. JMS’s focus on escheat management and asset recovery not only enhances our current capabilities but also allows us to deliver even more impactful solutions to help businesses navigate complex compliance challenges.”

JMS president and CEO James Santivanez is joining Aprio as a partner and provides guidance to clients on unclaimed property and state and local tax issues. 

“We created JMS to make an impact nationally in the unclaimed property consulting industry, and I’m proud of our nearly 20-year history of helping clients mitigate risk and capitalize on opportunities resulting from accurate and properly managed unclaimed property compliance,” Santivanez said in a statement. “Joining with Aprio takes us to the next level, allowing us to build upon our success while providing even greater value to our clients. This is an exciting next step in our journey.”

JMS founder and director Sherridan Santivanez is also joining Aprio as a partner. He specializes in representing clients before state enforcement authorities and managing complex audits and voluntary disclosures for some of the world’s largest companies. She provides strategic guidance on audit preparation and navigates interactions with state and third-party auditors.

Aprio received a private equity investment last July from Charlesbank Capital Partners in Boston. The firm recently announced plans to open a law firm in Arizona known as Aprio Legal LLC, in partnership with Radix Law. (KPMG has also recently opened a law firm in Arizona known as KPMG Law US.) Aprio has completed over 20 mergers and acquisitions since 2017, adding Ridout Barrett & Co. CPAs & Advisors last December, and before that, Antares Group, Culotta, Scroggins, Hendricks & Gillespie, Aronson, Salver & Cook, Gomerdinger & Associates, Tobin & Collins, Squire + Lemkin, LBA Haynes Strand, Leaf Saltzman, RINA and Tarlow and Co.

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