This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.
The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
The SEC in October will decide the fate of a proposal to expand the auditor’s report that some of the largest U.S. companies—Chevron Corp., Nike Inc., FedEx Corp., UnitedHealth Group, Nasdaq Inc., and 10 other companies and 13 trade groups—oppose.
However, investors and accounting firms generally support the Public Company Accounting Oversight Board’s enhanced auditor’s report, which will have auditors go beyond the traditional simple pass/fail determination and offer information on what areas of a company’s financial reporting kept the auditor and audit committee up at night.
The PCAOB in June voted out the planned rule. Under law, the Securities and Exchange Commission must vote whether to ratify the PCAOB rule by Oct. 26, SEC Chief Accountants Wesley Brickersaid Sept. 11.
Speakers at a Sept. 25 forum on the expanded auditor’s report shied away from outright predictions of the outcome of the SEC vote on the PCAOB measure, which calls for the external auditor to single out “critical audit matters” that proved particularly challenging for the auditor and audit committee.
However, the SEC hasn’t ever rejected a PCAOB rule on auditing, said participants in a panel discussion held by the New York State Society of CPAs.
The commission also could direct that the proposed rule be modified.
“I personally would be surprised if the SEC didn’t approve it, but who knows?” said Thomas Ray, a lecturer in accounting at Baruch College and a former PCAOB chief auditor.
Ray pointed to “significant comment from the corporate community” about its worries that the rule could have negative effects. Some companies are concerned that auditors would supplant company managers in making disclosures and choosing which disclosures to make. Companies that criticized the PCAOB proposal are also worried about financial reporting costs.
“It’s hard to say” how the SEC will vote, Jan Herringer, a partner at BDO USA LLP and incoming president of the NYSSCPA, told Bloomberg BNA.
Another panel member, Jeffrey Mahoney, general counsel of Council of Institutional Investors and an advocate of the changes to the auditor’s report, said, “If the decision is based on the views of investors, I think the answer is clear.”
Mahoney said the new rule would lead to improvements in audit quality and could affect shareholders’ votes on retaining a company’s independent auditor and on company directors, including members of the audit committee.
The PCAOB’s planned standard generated 50 comment letters to the SEC late this summer—the most ever generated by a PCAOB letter at the SEC review stage, said Jeanette Franzel, a PCAOB member and a panelist at the NY Society forum.
“If there’s an unintended consequence that suddenly people are focusing more on these high-risk issues” seen in the auditor’s views on critical matters, “that would be fantastic,” Franzel said. “And I think we will probably see that.”
The U.S. Chamber of Commerce organized the writing of an Aug. 18 letter to the SEC opposing the enhanced auditor’s reporting.
Signing onto that were Nike, NASDAQ, FedEx, Chevron, United Health, 10 other companies, and groups including Securities Industry and Financial Markets Association, American Insurance Association, Biotechnology Innovation Organization, and National Association of Real Estate Investment Trusts.
To contact the reporter on this story: Steve Burkholder in Norwalk, Conn. at sburkholder@bna.com
To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bna.com
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)