Financial Reporting and Audit Task Force Struggles in First Year
With July marking its first anniversary, the U.S. Securities and Exchange Commission’s (“SEC”) Financial Reporting and Audit Task Force is reflecting on the past year’s accomplishments. Unfortunately, the group has little to celebrate. To this point, task force investigations have not led SEC lawyers to charge anyone for fraud. Despite the slow start, SEC officials have discovered companies with faulty financial reporting controls and fragile application of accounting standards in areas that are usually sources of fraud like revenue recognition and expense recording. At a June 11th question-and-answer session in Washington, D.C., SEC Enforcement Division head Andrew Ceresney also acknowledged. Read More.
PCAOB Seeking Feedback on Proposal
Investors continue to support the Public Company Accounting Oversight Board’s (“PCAOB”) proposal that provides additional disclosures to reports. Originating four years ago, Concept Release No. 2011-003, Possible Revisions to PCAOB Standards Related to Reports on Audited Financial Statements and Related Amendments to PCAOB Standards, is in response to complaints of the current report’s pass-fail model. Investors felt the current model offers insufficient details, and desired more insight from the auditors who performed the audits. While the new proposal maintains the pass-fail model, it requests auditors to note critical audit matters (CAMs), which are issues they viewed during the audit as. Read More.