Form AP: separate audit hours and divided responsibility
Form AP can help identify an engagement partner and other accounting firms connected with an issuer audit. It does not provide a single universal “outsourced audit percentage.” Part IV measures participation using specified audit hours; Part V describes the financial-statement portion audited when responsibility is divided. Mixing those denominators creates a number the filing never reports.
This guide uses PCAOB Form AP instructions as read on October 25, 2026. The official page flags an approved amendment effective December 15, 2026 that is not yet effective at this article’s cutoff. The calculations below use the currently displayed instructions, not the future amended text. All firms and percentages in the worked examples are fictional.
Match the filing to the audit report
Start with the filing firm’s legal name and Firm ID, issuer CIK and any relevant series identifier, financial period end, audit-report date, and engagement partner. Similar issuer names and a global network logo are insufficient identity checks.
The Form AP instructions, Part III and Items 3.2–3.3 distinguish other firms participating under the lead firm’s responsibility from divided responsibility under AS 1206. Read the actual audit report alongside the form before deciding which table to interpret.
Keep the filing date, financial period, and audit-report date separate. An amendment corrects or supplies information that should have been present at original filing; it is not automatically a new annual audit. A changed report can also trigger a distinct reporting question. Retain the original form, any AP/A, and their relationship rather than counting every record as a separate engagement.
Establish the Part IV hour denominator
Part IV includes specified financial-statement audit work, interim review work and integrated internal-control audit work. Its instructions also identify exclusions and allocation rules. Read those instructions before calling the denominator all labor used anywhere in the audit ecosystem.
Excluded categories include the engagement quality reviewer, the specified Appendix K reviewer, engaged rather than employed specialists, certain equity-method investee auditors, and specified direct-assistance work. Relevant nonaccounting-firm participants can be attributed according to who commissioned and directed the work. Therefore the filing firm’s residual percentage need not mean hours performed exclusively by its employees.
Actual hours are used when available; a reasonable documented estimate is permitted when they are not. A public reader usually sees percentages or ranges, not the time-record system. Recalculating reported ranges is feasible, but verifying the complete denominator requires information that may remain private.
The PCAOB staff’s March 2025 Audit Focus on Form AP, “Common Deficiencies” and “Total Audit Hours Computation” highlights mistakes in participant thresholds, percentages, counts and identity fields. It is staff material supporting these checks, not a guarantee that every filed form is accurate.
Work the disclosed intervals
Assume a hypothetical Part IV uses ranges consistently and reports Firm A at 20% to less than 30%, Firm B at 5% to less than 10%, and four individually small firms in Item 4.2 with an aggregate 10% to less than 20%. Every percentage uses the same Part IV total-hour denominator.
| Group | Lower bound | Upper bound | Disclosure unit |
|---|---|---|---|
| Firm A | 20% inclusive | 30% exclusive | Named firm |
| Firm B | 5% inclusive | 10% exclusive | Named firm |
| Four firms individually below 5% | 10% inclusive | 20% exclusive | Aggregate group |
| Combined other-firm participation | 35% inclusive | 60% exclusive | Sum of nonoverlapping groups |
The aggregate range is [35%, 60%). The amount attributed to the filing firm is the complement: greater than 40% and no more than 65%, or (40%, 65%]. The endpoint reversal matters. Exactly 35% outside is possible under the reported lower limits, so exactly 65% residual is possible. Exactly 60% outside is excluded, so exactly 40% residual is excluded.
Do not use midpoints of 25%, 7.5% and 15% to report a verified 47.5% outside share. That is an arbitrary point assumption within the ranges. If used for a sensitivity, label it as such and retain the actual bounds.
A feasible illustration is A at 25%, B at 7%, and four small firms at 3% each: outside participation is 44% and the residual is 56%. This demonstrates consistency with the disclosed intervals; it is not information recovered from the filing.
Keep the five-percent boundary and small-firm count
Item 4.1 covers individual participation of 5% or more. Item 4.2 concerns firms individually below 5%, reporting their number and aggregate participation. Exactly 5% belongs in the former, not the latter.
In the example, Item 4.2 says four firms, but its aggregate range does not identify their individual contributions or legal names. It also does not mean there is only one small accounting firm contributing 10% to 20%. That would contradict the individual threshold.
As a consistency test, two firms each below 5% cannot together reach an aggregate lower bound of 10%. If such fields appeared together, verify transcription, the original form and amendments before inferring a particular error. Four firms can fit the stated range; the 3%-each illustration proves one feasible combination.
Do not add a named participant twice because it appears in multiple extracted tables or under a translated network name. Use legal identity and Firm ID where applicable. A network’s affiliated firms can be separate accounting firms for the form.
A different denominator in Part V
Consider a separate hypothetical Part V disclosure stating that another firm audited a portion representing 30% of total assets, as described in the audit report. That is a financial-statement magnitude, not 30% of Part IV hours.
Adding the Part IV minimum of 35% to 30% of assets and announcing “65% outsourced” is invalid. The numerator units and denominators differ, and divided responsibility is a different reporting relationship. Even identical numerical percentages would not make them interchangeable.
Item 5.1 permits the magnitude to be stated using assets, revenue or another appropriate criterion described in the report. Copy the criterion, period and amount into a separate column. Do not relabel a revenue percentage as an asset percentage or an hour percentage.
A firm doing a small share of total hours might audit a large reported asset balance, while complex valuation work can consume many hours for a small balance. Neither disclosure alone ranks audit quality or establishes the portion of business operations geographically located in a participant’s jurisdiction.
Execute the public-evidence checks
| Check | Fields or documents | Result to retain |
|---|---|---|
| Audit identity | CIK, period, report date and issuer name | Exact report-form match |
| Responsible legal firm | Firm ID and legal name | Separate network affiliation from entity |
| Partner identity | Partner ID and prior-ID fields | Avoid assuming an ID change proves a new person |
| Relationship | Items 3.2 and 3.3 plus audit report | Part IV and Part V interpreted separately |
| Participation | Items 4.1 and 4.2 | Bounds, count and threshold checked |
| Divided responsibility | Item 5.1 and referenced report | Criterion and magnitude preserved |
| Version history | AP/A and report revisions | Correction distinguished from new engagement |
Public forms and audit reports can establish the stated identities and reported ranges. They usually do not reveal every participant’s workpapers, allocation decisions or actual timesheets. Write “reported participation” when that is the evidence available, rather than claiming an independent verification of hours.
If the form and report disagree, check dates, dual dating, the relevant period and amendments first. Preserve both observations with exact source locations. Staff guidance notes that reasonable estimates do not require amendment merely because later actual hours differ; a numerical change is not automatically proof of an originally inaccurate filing.
Update the worksheet when AP/A corrects a field, a revised audit report changes the match, legal-firm identity is clarified, or the December 2026 amendments become applicable. Keep the cutoff and rule version visible so future readers can reproduce why the original interpretation used these fields.
Align a multi-period engagement before comparing hours
Part IV also addresses financial statements for multiple periods audited in a single engagement. Check Item 3.1.c and the instructions’ matching period basis before comparing a filing with an ordinary annual engagement. A larger reported share could reflect a different engagement population rather than a shift in current-year work.
For instance, a hypothetical reaudit covering two stated periods should not be silently treated as hours for only the latest fiscal year. Preserve the periods and the single-engagement indicator in the data table. If a comparison requires current-year-only hours that are not disclosed, mark that input unavailable instead of allocating the range equally between years.
FAQ
Is Part IV participation an asset-coverage percentage?
No. It uses the form’s specified audit-hour denominator.
Can a firm contributing exactly 5% stay in the small-firm aggregate?
No. The individual 5%-or-more boundary places it in Item 4.1 under these instructions.