An article written by Michael Rapoport "Regulators, Accounting Firms Bicker Over Audit Rule" discusses the recent debate among regulators and accounting firms as to where the name of the lead auditor should be reported.While regulators argue that the name be present on a company's annual report (10-K), accounting firms doing the auditing feel that the name should be reported on a Form 2 which is an accounting firm's own annual report.
Regulators want the auditor in charge to be recognized on the 10-K because it will be easier for investors to find and increases the accountability for auditors. Investor advocates say that putting it in the company's annual report is the simplest and more prominent place to disclose the partner's name. Arthur Levitt, who is the former Securities and Exchange Commission Charmain, agrees that the name should be disclosed in the 10-K saying, "If it's good enough to go in a document, it's certainly good enough to go in the 10-K."
On the other hand, accounting firms are pushing for the location of disclosure to be in the Form 2. They say that putting the name in the 10-K would expose their auditors to more lawsuits. Executive director of the Center for Audit Quality, Cindy Fornelli, believes that Form 2 is the right choice. She supports the efforts to make the disclosure more accessible and timely for investors.
I believe that lead auditors should be disclosed in a company's 10-K. I feel that reporting the names on a Form 2 says to investors that the auditors have something to hide. That they aren't willing to take full credit for their work. In addition, a Form 2 isn't available to investors in a timely manner. Accounting firms don't file their Form 2 until June covering the year ending the previous March.
Auditors should be held fully accountable for their work. Reporting the lead "engagement partner" name is one of the most sure ways of doing so.
