Crossing t's: Does Form AP quality signal audit quality?
This is a joint data analysis between The Dig and Deep Quarry that looks into the question of whether firms that repeatedly fall down on Form AP signal poor audit quality.
The battle over audit transparency in the U.S. has long focused on whether naming the lead engagement partner would expose firms to liability or empower investors. Nearly a decade after the PCAOB mandated Form AP disclosures, critics still dismiss compliance missteps as harmless violations. But our analysis suggests otherwise: repeat errors in Form AP filings—whether missing, late, or incorrect—often cluster around the very firms later sanctioned for serious audit failures. Far from trivial, these data points offer a valuable and underused lens into audit quality.
Behind the paywall, we dig into the patterns—and the bad actors—they expose. Our key findings:
Form AP compliance failures are concentrated: A small number of audit firms were responsible for a disproportionate share of missing, late, or erroneous Form AP filing. Many of these firms later faced SEC or PCAOB enforcement actions for broader audit failures.
Administrative errors signal deeper issues: Inaccurate CIKs, fiscal period mismatches, and inconsistent engagement partner names suggest weak controls over Form AP submissions, with potentially broader quality control issues.
Large firms centralize Form AP submissions; small firms often do not: In larger audit firms, Form APs are typically submitted by a centralized compliance team—often within the National Office—promoting consistency and accuracy. In contrast, smaller firms sometimes rely on individual engagement partners to handle their own submissions.
Background
The debate in the United States over whether the audit engagement partner name should be available to the public goes back way beyond the first time the PCAOB proposed a rule in October 2011. The docket for this proposed rule shows that the first mention of the issue by the PCAOB was at one of the first PCAOB SAG meetings in 2005.
Later there was a concept release proposed in July of 2009. The suggestion was not a new one. On October 14, 2009, the PCAOB’s Standing Advisory Group (SAG) discussed the concept release and the comments that were received.
The proposal was not approved.
Jim Doty took over the reins at the Public Company Accounting Oversight Board (PCAOB) February 1, 2011, and, like the current but soon to be departing PCAOB Chair Erica Williams, Doty was full of ideas for reform.
In July 2011, Francine McKenna wrote for Forbes:
The comment period closed September 11, 2009 and boy oh boy were there a lot of comments. The audit firms arrived en masse to denounce the proposal. Jim Hamilton’s World of Securities Regulation had a great summary of their arguments.
Whenever talk of audit reforms comes around again, the audit industry uses fear of catastrophic liability and the need for higher fees to argue that the proposed reforms would hurt their clients, and, by derivation, investors. With the benefit of hindsight, it is safe to say when it comes to Form AP the apocalyptic predictions did not materialize.
While the U.S was debating the identification of the audit partner, the U.K. had already adopted a rule after the collapse of Arthur Andersen that provided audit engagement partner name transparency. Under the Companies Act of 2006, effective for the whole of the United Kingdom, auditors were required to sign audit opinions in their own name, for and on behalf of the firm, effective with fiscal years starting after April 6, 2008.
Since then the accounting profession in the U.K. has neither fallen apart nor have individual partners been attacked by bloodthirsty packs of pitchfork-wielding, post- financial crisis investors. There has, however, been a noticeable increase in audit partner names in media reports when companies fail or are found to be filled with fraud.
In 2013, the PCAOB announced a re-proposal of a rule to require public companies to reveal the name of the lead audit partner as part of the annual reporting process. Chairman James Doty made the announcement at the PCAOB Standing Advisory Group meeting and the Wall Street Journal covered it:
“I believe it’s a good idea for the capital markets to have it,” said James Doty, chairman of the government’s Public Company Accounting Oversight Board said at a meeting in Washington on Wednesday.
Currently only the name of an audit firm, such as PricewaterhouseCoopers or Deloitte & Touche, is signed at the end of corporate annual reports.
The move is the PCAOB’s second attempt at increasing transparency around auditors. The watchdog agency first proposed a rule to name audit partners in October 2011. The new version takes into account public comments, and will be open for another round of comments for 60 days. The final rule is expected in the spring.
“In the two years I’ve been here, I’ve become more convinced by what I’ve seen that it is in the long range best interest of the public auditing profession,” Mr. Doty said.
The PCAOB, in its re-proposed rule in 2013, Improving Transparency Through Disclosure of Engagement Partner and Certain Other Participants in Audits, said audit firms, in particular, had expressed concerns that identification of the engagement partner would put misleading emphasis on a single individual when an audit, particularly a large multinational audit, is a group effort. Similar to previous audit firm concerns about disclosing audit firm tenure in the annual report, the auditors claimed disclosure of engagement partner names could “confuse investors”.
In June of 2015, the PCAOB proposed, again, based on comments on previous proposals going back to 2009, that disclosure of the partner name by the audit firm be mandated using a new form, Form AP, to be filed with the PCAOB on an annual basis in conjunction with the issuance of the auditor’s opinion for each company. On July 1, 2015 the SEC issued a competing proposal for naming partners assigned to public company audits that suggested company audit committees could be required to disclose the partner name in the proxy every year.
Instead, the PCAOB’s proposal, establishing Form AP, was adopted on December 15, 2015, with an effective date of auditors' reports issued on or after January 31, 2017, or three months after SEC approval of the final rules, whichever is later.
Academic research suggesting a negative impact on "audit quality" from new auditing standards typically clusters around periods immediately following the suggestion of new standards such as auditor rotation (Reid and Carcello 2017), the implementation of new mandates such as inspections of broker-dealer audits (Schnader, et al. 2019), and auditor tenure disclosure (Dunn, et al. 2021). These proposals, and then introduction of Form AP — a mandate for audit engagement partner identification and component firm participation — came at a particularly active research period that delivered mostly negative feedback to regulators (Cunningham, et al. 2019, Lee and Levine 2020; Gipper, et al. 2021; Doxey, et al. 2021).
It may be that some research is tackled too soon, before all the results are in. Research conducted too early on limited data may reinforce the previous resistance to change as firms are getting used to the new requirement and may appear to support the prior status quo.
However, not everyone thought that changes brought by Form AP disclosures, and later Critical Audit Matter (CAM) disclosures, had a negative impact (Dee et al. 2015; Burke, et al. 2019; Fuller, et al. 2021). Once new PCAOB standards are in place for a while, research can better reflect that changes do deliver improved "audit quality" and benefits to investors (Christensen, et al. 2021; Aobdia, et al. 2021; Aobdia, et al. 2024).
We were prompted to take a closer look at the benefits of Form AP, as a result of the ominous threat to the very existence of the PCAOB and its mandates, including Form AP. After a failed legislative attempt to fold the PCAOB activities into the SEC, last week SEC Chair Paul Atkins fired PCAOB chair Erica Williams. Williams' reform-oriented tenure and, in particular, her stepped-up emphasis on enforcement of PCAOB rules and standards, brought out the critics in droves.
Even one PCAOB Board member, Christina Ho, dismissed a March 2025 PCAOB enforcement action against firms for Form AP violations as trivial, and said in a LinkedIn post:
In my view, these violations are akin to parking ticket violations, and the sanctions are punitive and excessive. I also wonder what the opportunity costs are when we spend our resources on this type of violation. Furthermore, it appears that PCAOB is determined to spread an exaggerated narrative suggesting that public company audits and the auditing profession cannot be trusted. This binary, chest-thumping approach of bashing the profession in the name of investor protection will only lead to more polarization and distrust.
While a one-off parking violation is not an uncommon misstep in a big city with limited parking space and less-than-transparent parking signage, we argue that the firms systematically and repetitively committing these so-called traffic violations are the profession's bad players. Failure to enforce parking violations encourages repeat offenders and encourages unscrupulous players to believe no one is watching, like the driver who is willing to block a fire hydrant raising the risk that firefighters can't get water to a burning building.
Our resolve to dig into this data was reinforced by the story of Shell plc and its reported audit engagement partner rotation violation. As Francine McKenna wrote, despite the audit engagement partner naming disclosures now mandated by Form AP and UK Companies House, it is still a mystery, based on public records, how and why Shell plc engagement partner Gary Donald overstayed his tenure at the company.
As a result, we sought to explore the question: Are systematic violations of Form AP — intended to support auditor independence goals — a broader signal for poor audit quality?
To answer this question, we analyzed a limited data set of Form AP filings made in 2023 for fiscal year ends that fell in early 2023, 2022, and prior for several types of violations: missing Form APs, very late Form APs, and incorrect reporting of the engagement partner names.
After the paywall we dig into detailed analysis based on this limited data set.