Dive Brief:

• Implementation of the Public Company Accounting Oversight Board's controversial Rule 3211 two years ago hasn't led to higher quality audits, researchers said in an academic paper published this week. 
• PCAOB's Rule 3211 requires disclosure of the lead auditors — what the researchers called lead engagement partners — on Form AP within 35 days after the company's audited annual report is released.
• The goal was to improve audit quality by increasing accountability, but that didn't appear to happen. "We are unable to detect a significant change in audit quality attributable to Rule 3211," said researchers Lauren Cunningham of the University of Tennessee, Chan Li of the University of Kansas, Sarah Stein of Virginia Tech, and Nicole Wright of James Madison University.
• Their paper "What's in a Name? Initial Evidence of U.S. Audit Partner Identification Using Difference-in-Differences Analyses" was published in the September/October issue of The Accounting Review.

Dive Insight:

To measure change in audit quality, the researchers created two groups, one consisting of S&P 1500 companies that disclosed audit engagement partners at their annual meetings and on their websites in the year prior to Rule 3211, and one of all companies that issued their annual reports in the months prior to Jan. 31, 2017, when the rule took effect.

The researchers said audit quality should have improved significantly after the rule took effect for the second group, but there was no evidence of that.

They offered two reasons. First, accountability could have already been sufficiently high prior to mandatory disclosure, so adding the disclosure requirement didn't induce additional improvements to audit quality, and second, having the disclosure on Form AP, rather than on the annual report itself, may not have "pervasively affected partners' sense of accountability," the researchers said.

Having the engagement partners named on the annual report was PCAOB's original proposal, dating back to 2009, but accounting groups opposed that.

The researchers said another look at the effect of the rule is needed to see if there is audit improvement over the long term.