The Public Company Accounting Oversight Board (PCAOB) proposed new rules that would strengthen the requirements of lead auditors supervising auditors from outside the firm. The PCAOB said that 80 percent of Fortune 500 audits performed by U.S. global network firms involved other auditors. The new rules would outline exactly what the lead audit partner's responsibilities are when supervising these other auditors. 

The proposal itself would amend several existing auditing standards. Specifically, it would: 

• Amend AS 1201, Supervision of the Audit Engagement to provide additional direction to a lead auditor on how to apply AS 1201's principles-based supervision provisions to supervision of other auditors. The proposed amendments would prescribe certain procedures to be performed by the lead auditor in supervising other auditors' work.

• Amend AS 2101, Audit Planning to incorporate and update requirements of current standard, AS 1205, Part of the Audit Performed by Other Independent Auditors, to specify that they be performed by a lead auditor in an audit that involves other auditors. For example, the proposal would incorporate and revise requirements for determining a firm's eligibility to serve as lead auditor in an audit that involves other auditors.

• Amend AS 1215, Audit Documentation to require that a lead auditor properly document which specific work papers of other auditors the lead auditor has reviewed, but not retained.

• Amend AS 1220, Engagement Quality Review to require explicitly that the engagement quality reviewer evaluate the engagement partner's determination of a firm's eligibility to serve as lead auditor. 

In addition to these amendments, the proposal would create new requirements that a lead auditor: 

• Obtain a representation from each other auditor that the other auditor is duly licensed to practice under the applicable laws of the relevant country or jurisdiction.

• Determine whether each other auditor that would play a substantial role in the preparation or furnishing of the lead auditor's report is, or is required to be, registered with the PCAOB.

• Disclose the name of the other auditor in the lead auditor's report.

The Board's proposal will be open for public comment through July 29, 2016.