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Focus on Audit Committees, Accounting and the Law
  • This blog provides a legal perspective on developments in accounting standards, financial reporting, auditing and regulation of the accounting profession. Our primary focus is on identifying and analyzing developments that are important to audit committees and their advisers.

    Blog author Tom White is a partner in the firm’s Corporate practice who regularly advises companies, audit committees and accounting firms on accounting and auditing matters. Tom is co-chair of the National Conference of Lawyers and CPAs.

  • PCAOB Issues Practice Alert on Auditing Revenue

    Author: Tom White

    Posted on: October 24, 2014

    In September the Public Company Accounting Oversight Board issued a Staff Practice Alert on Auditing Revenue. The alert notes that for most companies, revenue is one of the largest accounts and an important driver of a company's operating results. For audit purposes revenue is typically a significant account, often involving significant risks that warrant special audit consideration.

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    Topics: Auditing, News, PCAOB

  • PCAOB Addresses Effect of New Going-Concern Accounting Standard on Current Auditing Standard

    Author: Alan Wilson

    Posted on: October 22, 2014

    On September 22, 2014, the Public Company Accounting Oversight Board issued a staff audit practice alert, which discusses an auditor's duty under to evaluate a company's ability to continue as a going concern in light of the Financial Accounting Standards Board's new going concern standard, ASC 205-40.

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  • SEC Approves PCAOB Related-Party Auditing Standards

    Author: Tom White

    Posted on: October 22, 2014

    On October 21, the Securities and Exchange Commission approved the Public Company Accounting Oversight Board's new and amended auditing standards regarding related party transactions, significant and unusual transactions and financial relationships and transactions with executive officers. The standards will apply to audits of emerging growth companies.

    Read More »

    Topics: Auditing, PCAOB

  • Large-Company Audit Committees Continue to Expand Voluntary Disclosures

    Author: Tom White

    Posted on: October 14, 2014

    As reported in prior posts, many regulators, governance groups and investor advocates have recommended that audit committees voluntarily expand the disclosures about their work included in the proxy statement. A recent Ernst & Young report described "a consistent movement by Fortune 100 companies to enhance the depth and scope of audit committee related disclosures."

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  • FASB Issues New Going Concern Standard

    Author: Alan Wilson

    Posted on: October 8, 2014

    On August 27, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-15, which establishes the Board's new going concern disclosure standard for public and non-public companies. The new standard requires management to assess, in the aggregate, conditions or events that raise "substantial doubt" about the organization's ability to continue operating as a going concern.

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  • FASB Standard-Setting Update ~ September 2014

    Author: Tom White

    Posted on: September 23, 2014

    Here is the most recent "Summary of FASB Developments" prepared by Randy McClanahan of Butler Snow LLP in Birmingham, Alabama, for the Annual Meeting of the ABA Business Law Section Law and Accounting Committee. Randy's summary provides updates on the Financial Accounting Standards Board's new standards on going concern, revenue recognition, and other topics.

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  • SEC Appoints New Chief Accountant

    Author: Tom White

    Posted on: August 27, 2014

    The SEC has named James Schnurr as its Chief Accountant. Mr. Schnurr, who recently retired from Deloitte LLP, succeeds Paul Beswick. In announcing Mr. Schnurr's appointment, the SEC placed particular emphasis on the role of the chief accountant in ensuring that financial statements are presented fairly and have credibility.

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    Topics: News, SEC

  • SEC Charges CEO and CFO for Internal Control Reporting Violations

    Author: Tom White

    Posted on: August 13, 2014

    Last month the SEC initiated administrative proceedings charging the CEO and former CFO of a Florida-based computer equipment company with making misrepresentations about the company's internal control over financial reporting (ICFR). The SEC alleges that in 2008 and the first quarter of 2009, the executives were aware of deficiencies in and circumvention of internal controls relating to inventory and the resulting falsification of the company's books and records.

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    Topics: News, SEC

  • DC Circuit Reaffirms Attorney-Client Privilege in Internal Investigations

    Author: Tom White

    Posted on: July 9, 2014

    In an important decision, the United States Court of Appeals for the District of Columbia Circuit held that the attorney-client privilege applies to communications with investigators in internal investigations as long as one of the significant purposes of a communication was to obtain legal advice. The Court rejected a lower court ruling that the privilege did not apply where the investigation had a parallel purpose of complying with regulatory requirements or implementing company policy, in addition to seeking legal advice.

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  • SEC Chair Reassures Directors on Gatekeeper Role

    Author: Tom White

    Posted on: July 7, 2014

    In a June 23 speech at the Stanford Directors' College, Chair Mary Jo White of the Securities and Exchange Commission sought to allay concerns that the SEC’s focus on “gatekeepers” will put conscientious corporate directors at risk of enforcement actions. Ms. White first observed that “while there are certainly other gatekeepers who may be closer to some of the action or more familiar with the details of a transaction or disclosure document, a company’s directors serve as its most important gatekeepers.” She emphasized the role directors play in ensuring the right “tone at the top” and instilling a culture of compliance.

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  • PCAOB Adopts New Auditing Standard on Related Party Transactions and Other Matters

    Author: Tom White

    Posted on: June 17, 2014

    On June 10, the Public Company Accounting Oversight Board adopted new and amended auditing standards for auditing relationships and transactions with related parties, significant and unusual transactions, and financial relationships and transactions with executive officers.

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    Topics: Auditing, PCAOB

  • SEC To Review Audit Committee Report in Proxy Statement

    Author: Tom White

    Posted on: May 29, 2014

    In a May 20 speech at the Financial Accounting Foundation Trustees Dinner, SEC Chair Mary Jo White said that the SEC has initiated a review of the audit committee report that is included in proxy statements. The report, which is signed by the members of a company’s audit committee, currently requires specified information about communications with accountants and the committee’s recommendation regarding filing of the company’s Form 10-K.

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    Topics: Auditing, SEC

  • Regulators Emphasize Audit Committee Responsibilities in Recent Speeches

    Author: Tom White

    Posted on: May 12, 2014

    Chairman James Doty of the Public Company Accounting Oversight Board continued his program of outreach to audit committees in a May 2 speech on "Developments in the Relationship Between Audit Committees and Auditors" at Northwestern University Law School. Mr. Doty reiterated many of his recent themes.

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    Topics: Auditing, PCAOB

  • FASB Standard-Setting Update ~ April 2014

    Author: Tom White

    Posted on: April 22, 2014

    Here is the most recent “Summary of FASB Developments” prepared by Randy McClanahan of Butler Snow LLP in Birmingham, Alabama, for the Spring Meeting of the ABA Business Law Section Law and Accounting Committee. Randy’s summary provides updates on the Financial Accounting Standards Board’s current projects on going concern, revenue recognition, leases and other topics.

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  • SEC Brings Another Case Against An Audit Committee Chair

    Author: Tom White

    Posted on: April 21, 2014

    A recent enforcement action represents another example of the Securities and Exchange Commission’s current focus on “gatekeepers,” including audit committees, and gatekeepers’ failure to take action in response to “red flags.” On March 27, the SEC instituted settled administrative proceedings against the former chair of an audit committee of a public company, based on the chair’s apparent failure to act when presented with information suggesting that the company had made false representations in SEC filings.

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  • PCAOB Board Members Comment on Concerns of Issuers and Audit Committees

    Author: Tom White

    Posted on: April 1, 2014

    In a pair of recent speeches, members of the Public Company Accounting Oversight Board have commented publicly on concerns expressed by some issuers and audit committees about the impact of recent PCAOB’s initiatives. These include the PCAOB’s audit committee “outreach” and the impact of the PCAOB’s negative comments on deficiencies in audits of internal control over financial reporting.

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    Topics: Auditing, PCAOB

  • SEC Charges Audit Committee Chair and Others in Accounting Fraud Case

    Author: Lesley Fredin

    Posted on: March 14, 2014

    In a complaint filed March 11, 2014, the Securities and Exchange Commission charged AgFeed Industries, Inc. (“AgFeed”) with violations of the securities laws based on accounting fraud. AgFeed is a hog production and animal nutrition company, now in bankruptcy, which operated in China and the United States. According to the complaint, AgFeed reported false revenues from its China operations between 2008 and June 30, 2011.

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  • SEC’s Chief Accountant Focuses on Audit Committees

    Author: Emily McGowan

    Posted on: March 3, 2014

    Paul Beswick, Chief Accountant of the Securities and Exchange Commission’s Office of the Chief Accountant, focused on the role of audit committees during his February 22, 2014 presentation at the Practising Law Institute’s SEC Speaks conference, indicating that audit committees would be a priority for the Commission in 2014. Mr. Beswick highlighted the importance of communication between the committee and the external auditor and ongoing monitoring of the auditor’s work.

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  • Financial Accounting Foundation Assesses Fair Value Accounting Standard

    Author: Tom White

    Posted on: February 28, 2014

    The Financial Accounting Standards Board’s Statement No. 157 (now known as Accounting Standards Codification Topic 820), which was adopted in 2006, provides a framework for measuring fair value and for disclosures regarding fair value determinations. Companies often find FAS 157 to be one of the most difficult standards to apply.

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  • PCAOB to Host Audit Reporting Roundtables

    Author: Tom White

    Posted on: February 27, 2014

    The Public Company Accounting Oversight Board announced that it will hold public meetings on April 2–3, 2014, on its proposal to enhance the auditor’s report and expand the auditor’s responsibilities for other information contained in companies’ annual reports.

    Read More »

    Topics: Auditing, PCAOB

  • Update: SEC’s Financial Reporting and Audit Task Force

    Author: Tom White

    Posted on: February 20, 2014

    WilmerHale has released a newsletter reporting developments about the SEC’s Financial Reporting and Audit Task Force. It reports on recent comments by the Vice Chair of the Task Force about the objectives, administration and early initiatives of the Task Force since its formation was announced by the SEC last July.

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  • Momentum Builds for Disclosure Simplification

    Author: Tom White

    Posted on: February 20, 2014

    Members of the Securities and Exchange Commission have taken up the banner of “disclosure simplification.” In October 2013, SEC Chair Mary Jo White addressed “information overload” in SEC disclosures and called for “meaningful review” of SEC disclosure requirements.

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  • PCAOB Criticizes Auditing Firms’ Engagement Quality Reviews

    Author: Tom White

    Posted on: February 10, 2014

    In December 2013, the Public Company Accounting Oversight Board issued a report on its Observations Related to the Implementation of the Auditing Standard on Engagement Quality Review. The report assessed auditing firms’ implementation of the PCAOB’s Auditing Standard No. 7, Engagement Quality Review, based on the PCAOB’s 2011 inspections of registered public accounting firms.

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    Topics: Auditing, PCAOB

  • PCAOB Ends Mandatory Rotation Project

    Author: Tom White

    Posted on: February 7, 2014

    At an SEC meeting on Wednesday, February 5, James Doty, Chairman of the Public Company Accounting Oversight Board, stated that the PCAOB is no longer actively pursuing its project on mandatory rotation for public company audit firms. The PCAOB first proposed to look at mandatory rotation in August 2011 and held several public roundtables on the subject in 2012. Mandatory rotation engendered substantial opposition from companies, audit committees and accounting firms. The House of Representatives passed a bill barring the PCAOB from implementing it.

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    Topics: Auditing, PCAOB

  • ALJ Sanctions Chinese Accounting Firms in Document Production Dispute

    Author: Tom White

    Posted on: January 29, 2014

    On January 22, an SEC administrative law judge issued an initial decision in the SEC’s proceeding against five Chinese accounting firms arising from the firms’ failure to produce documents in connection with SEC investigations. The firms, which included associated firms of the Big Four and another firm, declined to produce the documents on the ground that production would violate applicable laws of the People’s Republic of China. The SEC initiated an administrative proceeding against the firms in late 2012.

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    Topics: News, SEC

  • KPMG Audit Committee Survey Addresses Disclosure, Risk Oversight and Other Issues

    Author: Tom White

    Posted on: January 22, 2014

    KPMG’s Audit Committee Institute has released its 2014 Global Audit Committee Survey. The survey reflects the comments of nearly 1500 audit committee members from around the world. The survey has numerous findings, but perhaps the most noteworthy one concerns the question of whether audit committees should provide additional reporting to investors.

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  • Highlights From Annual AICPA Conference

    Author: Tom White

    Posted on: December 30, 2013

    The American Institute of Certified Public Accountants’ annual conference on SEC and PCAOB developments often generates news about the thinking of key regulators. This year, much of the discussion from regulators at the conference, which was held December 9-11, was a reiteration of continuing themes. Matters of particular interest to audit committees include: Accounting Firm Expansion of Non-Audit Businesses. PCAOB Chairman James Doty and SEC Chief Accountant Paul Beswick reiterated concerns expressed at last year’s conference regarding some accounting firms’ expansion into non-audit businesses.

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  • PCAOB Re-Proposes Rules to Require Disclosure of Engagement Partners and Audit Participants

    Author: Tom White

    Posted on: December 10, 2013

    On December 4, the Public Company Accounting Oversight Board voted to re-propose controversial rules to require audit firms to disclose in their audit reports the name of the lead engagement partner on the audit and other accounting firms or persons who took part in the audit. The re-proposal is the latest development in a process that dates back to 2005 and includes a 2009 concept release and a prior rule proposal in 2011.

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    Topics: Auditing, PCAOB

  • FASB Standard-Setting Update ~ December 2013

    Author: Tom White

    Posted on: December 5, 2013

    Here is the latest "Summary of Current FASB Developments" prepared by Randy McClanahan of Johnston Barton Proctor & Rose LLP in Birmingham, Alabama, for the fall meeting of the ABA Business Law Section Law and Accounting Committee. The summary includes current updates on the Financial Accounting Standards Board’s going concern, revenue recognition, and lease accounting projects.

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  • ISS Seeks Input on Auditor Ratification

    Author: Tom White

    Posted on: December 3, 2013

    Institutional Shareholder Services, a proxy advisory firm, is seeking input from financial market participants with respect to its policy approaches on several issues, including votes ratifying the selection of auditors. ISS’s consultation paper states that ISS rarely recommends against ratification of auditors, other than in certain exceptional circumstances. ISS notes that in recent years some shareholders, the Public Company Accounting Oversight Board, and other audit industry observers have “raised concerns about excessive tenure potentially compromising the independence of auditors.”

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  • Corporate Governance and Policy Organizations Call for Enhanced Audit Committee Disclosures

    Author: Tom White

    Posted on: November 26, 2013

    A group of governance and policy organizations calling itself the Audit Committee Collaboration has issued a paper entitled Enhancing the Audit Committee Report: A Call to Action. The group “call[s] on public company audit committees of all sizes and industries to voluntarily and proactively improve their public disclosures to more effectively convey to investors and others the critical aspects of the important work that they currently perform.”

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  • PCAOB Creates Audit Committee Website

    Author: Tom White

    Posted on: November 25, 2013

    As part of its “audit committee outreach,” the Public Company Accounting Oversight Board has added a new web page called Information for Audit Committees. The page collects in one place various PCAOB documents relating to audit committees, including statements about its inspection process and findings, its new auditing standard on audit committee communications, and relevant speeches by board and staff members. 

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    Topics: Auditing, PCAOB

  • PCAOB Establishes Center for Economic Analysis

    Author: Tom White

    Posted on: November 14, 2013

    On November 6, the Public Company Accounting Oversight Board announced that it is establishing a Center for Economic Analysis. According to the PCAOB’s release, the Center “will advise the PCAOB on how economic theory, analysis, and tools can be better used to enhance the effectiveness of PCAOB program areas, including standard setting, inspections and other oversight activities.

    Read More »

    Topics: News, PCAOB

  • PCAOB Issues Practice Alert on Internal Control Audits

    Author: Tom White

    Posted on: October 31, 2013

    On October 24, the Public Company Accounting Oversight Board issued a Staff Audit Practice Alert on Considerations for Audits of Internal Control Over Financial Reporting. The Practice Alert builds upon a 2012 report that identified significant auditing deficiencies in audits of internal control over financial reporting. In light of these deficiencies, the Practice Alert discusses the application of PCAOB Auditing Standard 5 and other standards to specific aspects of the internal control audit.

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    Topics: Auditing, PCAOB

  • SEC Chair White Outlines Path Forward on Disclosure Reform

    Author: Tom White

    Posted on: October 21, 2013

    In a speech to the National Association of Corporate Directors on October 15, SEC Chair Mary Jo White discussed the potential for “information overload” in SEC disclosures. Chair White raised the question “whether investors need and are optimally served by the detailed and lengthy disclosures about all of the topics that companies currently provide in the reports they are required to prepare and file with us.”

    Read More »
  • PCAOB Updates Standard-Setting Agenda

    Author: Tom White

    Posted on: October 8, 2013

    The Chief Auditor of the Public Company Accounting Oversight Board issues a quarterly standard-setting agenda that identifies major standard setting projects and anticipated timetables. Among the updates disclosed in the Board’s September 30, 2013 agenda are the following: Audit Transparency. The agenda now indicates that the Board will issue a reproposal of its 2011 proposed standard regarding identification of the engagement partner and other participants in the audit.

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    Topics: Auditing, PCAOB

  • SEC Enforcement Staff Announces “Operation Broken Gate”

    Author: Tom White

    Posted on: October 2, 2013

    On Monday, September 30, the Securities and Exchange Commission announced that it had charged three auditors with violating federal securities laws or failing to comply with US auditing standards during their audits and reviews of financial statements. The charges alleged fairly egregious deficiencies in audits of OTC companies performed by individual CPAs and do not, in themselves, appear to break significant new ground.

    Read More »
  • SEC Staff Underscores Renewed Emphasis on Accounting Fraud

    Author: Arian June

    Posted on: September 27, 2013

    Last week, in a speech at an American Law Institute Continuing Legal Education event, SEC Co-Director of Enforcement Andrew Ceresney described several of the investigative initiatives that are planned for the Commission’s new Financial Reporting and Audit Task Force.

    Read More »
  • Many Audit Committees Provide Expanded Disclosure in 2013 Proxy Statements

    Author: Tom White

    Posted on: September 23, 2013

    According to a new Ernst & Young report, many Fortune 100 companies have voluntarily provided increased audit-committee related disclosure in their 2013 proxy statements. The report suggested that the increase in voluntary disclosure represented a response to investors’ and policymakers’ expressed interest in greater audit committee transparency.

    Read More »
  • FASB Standard-Setting Update ~ September 2013

    Author: Tom White

    Posted on: September 3, 2013

    Here is a Summary of Current FASB Developments provided by Randy McClanahan of Johnston Barton Procter & Rose LLP in Birmingham, Alabama, for the August meeting of the ABA Business Law Section Law and Accounting Committee. Among other important topics, Randy provides a valuable summary of FASB’s latest exposure draft for a new lease accounting standard.

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  • PCAOB Proposes Changes to Auditor Reporting Standards

    Author: Tom White

    Posted on: August 15, 2013

    On August 13, the Public Company Accounting Oversight Board issued its long-awaited proposed modifications to auditor reporting standards. The proposals follow a process that included a concept release issued over two years ago that discussed possible changes to the standard auditor’s report to provide more useful information to investors. 

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    Topics: Auditing, PCAOB

  • GAO Issues Report on Internal Control Audits for Small Companies

    Author: Tom White

    Posted on: July 17, 2013

    Earlier this month, the General Accounting Office issued a report on the impact of the exemption of small public companies from the Sarbanes-Oxley Act’s internal control attestation requirements. In 2010, the Dodd-Frank Act exempted public companies with market capitalization of less than $75 million from section 404(b) of the Sarbanes-Oxley Act, which requires that public companies obtain an annual audit by a registered public accounting firm of their internal control over financial reporting.

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    Topics: Auditing, News

  • House Passes Mandatory Auditor Rotation Ban

    Author: Tom White

    Posted on: July 9, 2013

    Yesterday, the full House of Representatives passed by a large, bipartisan margin the bill (previously reported on June 20) to prohibit the Public Company Accounting Oversight Board from requiring mandatory auditor rotation. The bill also would require the General Accounting Office to conduct another study of mandatory auditor rotation and to report to Congress within one year after enactment.

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    Topics: Auditing, News, PCAOB

  • New SEC Initiative to Combat Financial Reporting Fraud

    Author: Tom White

    Posted on: July 3, 2013

    On July 2, the SEC announced the formation of a Financial Reporting and Audit Task Force. The task force, which will include attorneys and accountants from the Division of Enforcement, working with other offices of the SEC staff, “will concentrate on expanding and strengthening the Division's efforts to identify securities-law violations relating to the preparation of financial statements, issuer reporting and disclosure, and audit failures.”

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  • FASB Issues Proposed Going Concern Standard

    Author: Tom White

    Posted on: July 2, 2013

    As previously reported, the Financial Accounting Standards Board decided in November 2012 to proceed with its project to require companies to provide enhanced disclosures where there are questions regarding their financial viability. Last week, as described in this FASB Summary, FASB finally issued its formal proposal to require companies to evaluate and disclose “going concern uncertainties.”

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  • New SEC Case Emphasizes Importance of Internal Controls

    Author: Tom White

    Posted on: June 24, 2013

    The SEC recently brought an unusual case in which the alleged violations of law related principally to failure to maintain adequate internal control over financial reporting. In its complaint against PACCAR, the SEC identified errors in certain PACCAR periodic filings regarding segment reporting, footnote disclosures regarding impaired receivables and related reserves, and certain offsetting line items in its cash flow statements.

    Read More »
  • House Panel Approves Ban on Mandatory Auditor Rotation

    Author: Tom White

    Posted on: June 20, 2013

    The House Financial Services Committee has approved a bill that would prohibit the Public Company Accounting Oversight Board from imposing mandatory auditor rotation. The bill, which passed with bi-partisan support, provides that the PCAOB shall have no authority “to require that audits conducted for a particular issuer in accordance with the standards set forth under this section be conducted by specific auditors, or that such audits be conducted for an issuer by different auditors on a rotating basis.”

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    Topics: Auditing, News, PCAOB

  • ABA Issues New Auditor’s Letter Handbook

    Author: Tom White

    Posted on: June 5, 2013

    The American Bar Association Business Law Section has issued the Auditor’s Letter Handbook—Second Edition. This handbook, the first update since 1998, compiles the key guidance for lawyers’ responses to requests to provide information to auditors. It includes the 1975 ABA Policy Statement Regarding Lawyers’ Responses to Auditors’ Requests for Information, AICPA and PCAOB auditing standards, and interpretations issued over the years.

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    Topics: Auditing, News

  • COSO Issues New Internal Control Framework

    Author: Tom White

    Posted on: May 28, 2013

    Section 404 of the Sarbanes-Oxley Act and SEC regulations require public reporting companies to provide an annual management report on the effectiveness of the company’s internal control over financial reporting (ICFR). Most companies are also required to obtain annual ICFR audits by their external auditors. The evaluation, and when required, the audit, must be based on a “suitable, recognized” control framework, and management and the auditor must identify that framework in their reports.

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  • PCAOB and China Reach Agreement on Sharing Information

    Author: Tom White

    Posted on: May 24, 2013

    As noted in a prior item, US and Chinese securities regulators have been engaged in a standoff regarding the US regulators’ ability to exercise oversight over Chinese accounting firms that audit US-listed issuers and to obtain from the Chinese accounting firms documents relevant to investigations of Chinese issuers. China has not permitted the accounting firms to cooperate with US regulators, principally on grounds of national sovereignty and protection of “state secrets.”

    Read More »

    Topics: News, PCAOB

  • NASDAQ Withdraws Internal Audit Proposal

    Author: Tom White

    Posted on: May 17, 2013

    NASDAQ announced today that it was withdrawing, for the time being, its proposal to require NASDAQ-listed companies to have an internal audit function. NASDAQ took this action in response to comments filed with the SEC about the proposal, many of which raised concerns about the impact of the rule, particularly on smaller companies. NASDAQ stated that it intended to revise the proposed rule in light of the comments and resubmit it to the SEC.

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  • PCAOB Reproposes Auditing Standard for Related Party Transactions and Other Matters

    Author: Tom White

    Posted on: May 13, 2013

    On May 7, the Public Company Accounting Oversight Board issued a proposed new auditing standard and amendments to existing standards intended to strengthen the requirements for audit steps regarding related party transactions, significant unusual transactions, and financial relationships and transactions with executive officers. The PCAOB previously issued a proposal covering these matters in February 2012.

    Read More »

    Topics: Auditing, PCAOB

  • Senators Reintroduce PCAOB Transparency Bill

    Author: Tom White

    Posted on: April 30, 2013

    Senators Jack Reed (D-Rhode Island) and Chuck Grassley (R-Iowa) have reintroduced legislation requiring that formal disciplinary proceedings initiated against accountants by the PCAOB be public. Under the Sarbanes-Oxley Act, such proceedings are non-public unless and until a sanction is entered by the PCAOB and any stay of enforcement of the sanction pending appeal to the SEC is lifted.

    Read More »

    Topics: News, PCAOB

  • FASB Appoints New Chairman

    Author: Tom White

    Posted on: April 25, 2013

    The Financial Accounting Standards Board announced on April 23 that Russell Golden has been appointed its new Chairman for a term beginning July 1, 2013. Mr. Golden, who succeeds Leslie Seidman, has been a member of the FASB since 2010 and previously was its technical director.

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    Topics: FASB, News

  • Insider Trading Scandal Hits KPMG

    Author: Tom White

    Posted on: April 16, 2013

    Last week, news broke that a Los Angeles partner of KPMG had provided a friend with material non-public information about several KPMG audit clients, and the friend had traded on that information. KPMG terminated the partner and resigned as auditor of two clients for whom the partner was lead partner.

    Read More »

    Topics: Auditing, News

  • FASB Standard-Setting Update ~ April 2013

    Author: Tom White

    Posted on: April 12, 2013

    Randy McClanahan of Johnston Barton Procter & Rose LLP in Birmingham, Alabama, provided his latest Summary of Current FASB Developments at the recent meeting of the ABA Business Law Section Law and Accounting Committee in Washington. Randy’s summary discusses major standard-setting projects on the FASB’s agenda this year, including lease accounting, recognition and measurement of financial instruments, and revenue recognition.

    Read More »
  • Former SEC Senior Special Counsels Brown, Zepralka Join WilmerHale

    Author: Tom White

    Posted on: April 9, 2013

    We shared with you in a previous post that Meredith Cross, former Director of the Division of Corporation Finance at the Securities Exchange Commission (SEC), was rejoining the firm. WilmerHale has also announced that former SEC Senior Special Counsels Lillian Brown and Jennifer Zepralka have joined the firm. They both worked closely with Ms. Cross while at the SEC.

    Read More »

    Topics: News, SEC

  • White Confirmed as SEC Chairman

    Author: Tom White

    Posted on: April 8, 2013

    The Senate has unanimously confirmed Mary Jo White as the new Chairman of the SEC. As she indicated at her confirmation hearings, Ms. White’s priorities as chair will include: Finishing the rulemaking required by the Dodd-Frank and JOBS acts; further strengthening the enforcement function at the SEC; and working to ensure that the SEC has the expertise and technology to keep pace with “today’s high-speed, high-tech, and dispersed marketplace.”

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    Topics: News, SEC

  • Recent Developments in Europe May Influence US Debate on Mandatory Rotation

    Author: Tom White

    Posted on: April 3, 2013

    Throughout the Public Company Accounting Oversight Board’s review of mandatory audit firm rotation, PCAOB Chair James Doty has indicated that the PCAOB will look at how perceived issues of professional independence are being considered internationally. For example, in a February 8, 2013, speech, Mr. Doty stated that the PCAOB would “watch and evaluate the implications of international developments,” including EU consideration of mandatory auditor rotation.

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    Topics: Auditing, PCAOB

  • CAQ Issues ICFR Guide

    Author: Tom White

    Posted on: April 1, 2013

    The Center for Audit Quality has issued a useful Guide to Internal Control Over Financial Reporting. While discussing the regulatory requirements, the Guide is particularly helpful in outlining in plain English, with examples, how a system of ICFR works.

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  • PCAOB to Propose Reorganization of Auditing Standards

    Author: Tom White

    Posted on: March 22, 2013

    The Public Company Accounting Oversight Board has announced that it will consider a proposal for the reorganization of auditing standards at a meeting on March 26. Current PCAOB auditing standards, which apply to audits of US public companies and broker-dealers, are an amalgam of AICPA auditing standards that existed when the PCAOB began operations in 2003 and new auditing standards, and related amendments of existing standards, adopted by the PCAOB since 2003.

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    Topics: Auditing, PCAOB

  • NASDAQ to Require Companies to Have Internal Audit Function

    Author: Tom White

    Posted on: March 12, 2013

    The NASDAQ Stock Market has proposed a new rule requiring NASDAQ-listed companies to “establish and maintain an internal audit function to provide management and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control.” The function may be outsourced to a third party service provider other than the Company’s independent auditor.

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  • Bar Group Asks NYSE to Revise Risk Oversight Rule

    Author: Tom White

    Posted on: March 12, 2013

    The New York Stock Exchange’s Corporate Governance Standards provide that the audit committee shall “discuss policies with respect to risk assessment and risk management.” (See Rule 303A.07(b)(iii)(D).) The somewhat ambiguous commentary to this rule seems to require the audit committee to exercise general oversight over a company’s risk management.

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  • PCAOB Members Reappointed

    Author: Tom White

    Posted on: March 4, 2013

    The SEC has reappointed two members of the Public Company Accounting Oversight Board. They are Steven Harris, who has been a member of the PCAOB since 2008 and whose term will expire in 2017, and Jay Hanson, who joined the PCAOB in 2011 and whose term will expire in 2018. These reappointments will provide continuity in the PCAOB’s membership as it considers such matters as the auditor’s reporting model and mandatory auditor rotation.

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    Topics: News, PCAOB

  • SEC Speaks About Disclosure Reform

    Author: Tom White

    Posted on: February 26, 2013

    SEC officials addressed the need to examine current disclosure models at last week’s “SEC Speaks” conference in Washington. Commissioner Troy Paredes’ remarks on February 22 highlighted the importance of disclosure as “the cornerstone of the federal securities laws.”

    Read More »
  • SEC Approves PCAOB 2013 Budget and Fees

    Author: Tom White

    Posted on: February 25, 2013

    The Securities and Exchange Commission approved the Public Company Accounting Oversight Board’s 2013 budget at an open meeting on February 13, 2013. The PCAOB’s approved budget is approximately $245.6 million, an 8% increase over 2012. The PCAOB’s expenses are principally funded by accounting support fees imposed on issuers and broker-dealers.

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    Topics: News, PCAOB, SEC

  • SEC Commissioner Gallagher Addresses Federal Role in Corporate Governance

    Author: Tom White

    Posted on: February 6, 2013

    In a January 29 speech to the Corporate Directors Forum, SEC Commissioner Daniel Gallagher called for limiting the federal government’s role in regulating corporate governance. He observed that, “[d]espite the original intent of the drafters of the [Securities Exchange Act of 1934] to leave corporate governance in the hands of the states, Congress and federal regulators have been increasingly engaged in corporate governance matters, albeit via indirect routes.”

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  • The PCAOB’s 2013 Agenda

    Author: Tom White

    Posted on: February 6, 2013

    In a recent speech in New Orleans, Board Member Jeannette Franzel highlighted several of the Public Company Accounting Oversight Board’s recent initiatives and plans for 2013. These include: Strategic Plan. The board has adopted a new long-term strategic plan. Among the objectives of the plan are 1) identifying audit quality measures, 2) enhancing the PCAOB’s processes and systems for analyzing inspection findings...

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    Topics: Auditing, PCAOB

  • PCAOB Criticizes Internal Control Audits

    Author: Tom White

    Posted on: February 6, 2013

    In December 2012, the Public Company Accounting Oversight Board issued a Report containing observations from its 2010 inspections of major U.S. accounting firms about deficiencies in audits of internal control over financial reporting. Among other findings, the PCAOB staff found that in 15% of audit engagements that were inspected, the audit firm had failed to obtain sufficient audit evidence to support its opinion on the effectiveness of the audit client’s internal control over financial reporting, and that in most of these cases the staff identified deficiencies in the financial statement audits as well.

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    Topics: Auditing, PCAOB

  • SEC Staff Developing “Accounting Quality Model”

    Author: Tom White

    Posted on: January 21, 2013

    In a recent speech, Craig M. Lewis, the Chief Economist of the Securities and Exchange Commission and director of its Division of Risk, Strategy and Financial Innovation, described an initiative to develop an “Accounting Quality Model.” According to Mr. Lewis, the model will seek “to provide a set of quantitative analytics that could be used across the SEC to assess the degree to which registrants’ financial statements appear anomalous.” 

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    Topics: Investigations, SEC

  • Meredith Cross To Rejoin WilmerHale

    Author: Tom White

    Posted on: January 16, 2013

    WilmerHale is pleased that Meredith Cross, former Director of the Division of Corporation Finance at the Securities Exchange Commission, will rejoin the firm. As Director, Meredith was responsible for overseeing the SEC’s review process for securities offerings and issuer’s periodic SEC filings, as well as for major rulemakings under the Dodd-Frank and JOBS Acts and other important regulatory matters.

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    Topics: News, SEC

  • Impact of New Derivatives Regulations on Nonfinancial Companies

    Author: Tom White

    Posted on: January 9, 2013

    Companies that use derivatives should note that the Dodd-Frank Act’s sweeping new derivatives provisions are beginning to be implemented. Many of the Dodd-Frank Act’s requirements apply to nonfinancial public and private companies that use derivatives. Some companies may be able to rely on an “end user” exception from some of the regulations’ requirements, especially the requirements that derivative transactions be cleared through a registered derivatives clearing organization and traded on a regulated exchange or exchange-equivalent.

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    Topics: News, Regulatory

  • SEC Names New Chief Accountant

    Author: Tom White

    Posted on: December 26, 2012

    The Securities and Exchange Commission has named Paul Beswick as its Chief Accountant. Mr. Beswick has been Acting Chief Accountant since July. The SEC's Office of the Chief Accountant is responsible for establishing and enforcing accounting and auditing policy, and for overseeing the professional performance of public company auditors generally.

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    Topics: News, SEC

  • US/China Regulatory Dispute Intensifies

    Author: Tom White

    Posted on: December 26, 2012

    Companies with operations in China, and their audit committees, should keep an eye on the dispute between securities and accounting regulators in the United States and China. Recently, the Securities and Exchange Commission sued five Chinese accounting firms (all associated with global accounting networks) for failing to produce documents related to SEC investigations of Chinese companies listed in the US.

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  • SEC Approves PCAOB Standard for Auditor Communications

    Author: Tom White

    Posted on: December 18, 2012

    On December 17, the Securities and Exchange Commission approved the Public Company Accounting Oversight Board’s Auditing Standard 16—Communications with Audit Committees. The new standard will apply to audits for fiscal years beginning on or after December 15, 2012. Note that AS 16 has also been incorporated into the PCAOB’s standard for reviews of interim financial statements (SAS No. 100 or AU 722).

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    Topics: Auditing, PCAOB, SEC

  • News from the AICPA’s Annual Conference

    Author: Tom White

    Posted on: December 10, 2012

    The American Institute of Certified Public Accountants’ annual conference on Current SEC and PCAOB Developments is always a source of news about accounting and financial reporting matters. There were a number of noteworthy items at this year’s conference, held December 3–5 in Washington.

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  • Auditing Standard 16 Developments

    Author: Tom White

    Posted on: December 3, 2012

    The Public Company Accounting Oversight Board’s new Auditing Standard 16—Communications with Audit Committees—remains pending before the Securities and Exchange Commission. Only a handful of comments on the standard have been filed. The comment letter filed by the United States Chamber of Commerce objected to AS 16 on the principal ground that the PCAOB did not conduct an adequate cost-benefit analysis to support applying AS 16 to emerging growth companies, as defined in the Jumpstart Our Business Startups (JOBS) Act.

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    Topics: Auditing, News

  • FASB Standard-Setting Activity

    Author: Tom White

    Posted on: November 30, 2012

    Randy McClanahan of Johnson Barton Proctor & Rose LLP in Birmingham, Alabama, regularly provides the ABA Business Law Section Law and Accounting Committee with invaluable summaries of the status of major accounting standards under consideration by the Financial Accounting Standards Board.

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  • DOJ and SEC Issue FCPA Guidance

    Authors: Tom White, Kimberly Parker

    Posted on: November 20, 2012

    On November 14, the Department of Justice and the Securities and Exchange Commission jointly issued guidance on the Foreign Corrupt Practices Act. As discussed in this WilmerHale Client Alert, the guidance provides detailed information on the agencies’ joint FCPA approach and priorities. Many committees have oversight responsibilities with respect to legal and regulatory compliance, which can encompass anti-corruption laws.

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  • FASB Moving Forward on Going Concern Standard

    Author: Tom White

    Posted on: November 14, 2012

    The Financial Accounting Standards Board (FASB) has decided to proceed towards developing a new financial reporting standard for management’s assessment of going concern. Historically, US auditing standards have required an auditor to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for at least one year.

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  • CAQ Issues Guide on PCAOB Inspections

    Author: Tom White

    Posted on: November 12, 2012

    The Center for Audit Quality, which represents accounting firms that audit public companies, has issued a Guide to PCAOB Inspections (October 2012) that describes the Public Company Accounting Oversight Board’s process for inspecting firms that audit public companies and for reporting on the results of the inspections.

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    Topics: Auditing, PCAOB

  • Court Considers Sarbanes-Oxley Act Privilege for PCAOB Inspections

    Author: Jaclyn Moyer

    Posted on: November 1, 2012

    A recent case from the Western District of Missouri highlights the significant privilege issues that surround the Public Company Accounting Oversight Board’s inspection and disciplinary processes. In Bennett v. Sprint Nextel Corp., the court held that documents and information prepared by KPMG for a PCAOB inspection were privileged under Section 105(b)(5)(A) of the Sarbanes-Oxley Act and therefore not subject to production in civil litigation.

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    Topics: News, PCAOB

  • IFRS Foundation Issues Analysis of SEC Staff Report on IFRS

    Author: Tom White

    Posted on: October 29, 2012

    On October 22, 2012, the Trustees of the IFRS Foundation, the governing body of the International Accounting Standards Board, issued a Staff Analysis addressing the Final Staff Report issued in July 2012 by the SEC’s Office of Chief Accountant regarding the SEC staff’s Work Plan to study incorporation of International Financial Reporting Standards into the US financial reporting system.

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  • PCAOB Holds Third Public Meeting on Mandatory Audit Firm Rotation

    Author: Tom White

    Posted on: October 23, 2012

    On October 18, 2012, the Public Company Accounting Oversight Board held its third public meeting on mandatory audit firm rotation in Houston. Back in August 2011, the PCAOB, concerned about what it saw as continuing instances of lack of independence, objectivity and professional skepticism by auditors, issued a Concept Release regarding possible fundamental changes in the audit process such as mandatory periodic rotation of audit firms.

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    Topics: Auditing, PCAOB

  • New Guide for Audit Committee Annual Evaluation of the External Auditor

    Author: Tom White

    Posted on: October 23, 2012

    A group of seven leading governance and professional organizations has issued an important Guide for Audit Committee Annual Evaluation of the External Auditor (October 2012). Audit committees’ prescribed functions have always encompassed evaluating the performance of the audit in connection with a decision to retain the auditor for a succeeding period.

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    Topics: Auditing, News

  • CAQ Issues Practice Aid on Communications About PCAOB Inspections

    Author: Tom White

    Posted on: October 23, 2012

    On October 10, the Center for Audit Quality, a professional organization composed of public company auditing firms, issued a practice aid to assist accounting firms in discussing the Public Company Accounting Oversight Board’s inspection process with audit committees. In August the PCAOB issued a release designed to provide information to audit committees about its inspection process for registered public accounting firms and to suggest inquiries committees might make to their auditors about inspections.

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    Topics: Auditing, PCAOB

  • SEC Commissioner Walter Comments on IFRS

    Author: Tom White

    Posted on: October 23, 2012

    In an October 2 speech to the ABA International Law Section, SEC Commissioner Elise Walter discussed the prospects for incorporation of International Financial Reporting Standards in the US. Addressing international coordination of securities regulation, Commissioner Walter cited IFRS as an example of circumstances where the SEC’s efforts “might take longer than perhaps our foreign colleagues would hope.”

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  • Auditing Aspects of Conflict Minerals Rule

    Author: Tom White

    Posted on: September 13, 2012

    On August 22, the Securities and Exchange Commission adopted its long-awaited rule on Conflict Minerals Disclosure. The rule was mandated by the Dodd-Frank Act to respond to human rights violations by armed groups in the Democratic Republic of Congo (DRC), who are financing their activities through trade in certain “conflict minerals” originating in that country.

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    Topics: Auditing, SEC

  • PCAOB Adopts New Auditing Standard on Audit Committee Communications

    Author: Tom White

    Posted on: August 15, 2012

    On August 15, the Public Company Accounting Oversight Board adopted a new Auditing Standard No. 16 that prescribes the communications that an auditor must make to the audit committee of its client. The new standard seeks to enhance the “relevance, timeliness and quality” of the information conveyed by the auditor to the audit committee, particularly with respect to the auditor’s assessment of significant risk of financial statement misstatement and other matters that could affect the integrity of the financial statements...

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    Topics: Auditing, PCAOB

  • Meredith Cross Comments on Contingency Disclosures

    Author: Tom White

    Posted on: August 3, 2012

    At the ABA Business Law Section annual meeting on August 3, Director of the SEC Division of Corporation Finance Meredith Cross provided her perspective on loss contingency disclosures in light of the FASB’s recent decision to drop its disclosure project. Cross indicated that the FASB action probably will not change Corp Fin’s approach to the subject in comment letters.

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  • ABA Panelists Comment on JOBS Act Accounting Provisions

    Author: Tom White

    Posted on: August 3, 2012

    On August 3, a panel on the JOBS Act at the annual meeting of the ABA Business Law Section in Chicago discussed the Act’s accounting standard deferral provision for emerging growth companies. That provision allows EGCs to take advantage of delayed effective dates for private companies of the applicability of new accounting standards. Panelists observed that to date few EGCs appear to have opted in to this provision.

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  • PCAOB Releases Information For Audit Committees on Its Inspection Process

    Author: Tom White

    Posted on: August 1, 2012

    On Wednesday, August 1, the Public Company Accounting Oversight Board issued a release on “Information for Audit Committees About the PCAOB Inspection Process.” The release explains how the PCAOB conducts its inspections of auditors and what the reported results of an inspection signify. The PCAOB also provides suggestions to audit committees about matters that an audit committee should address with a company’s auditor.

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    Topics: Auditing, PCAOB

  • SEC Staff Issues IFRS Report

    Author: Tom White

    Posted on: July 16, 2012

    Late on Friday, July 13, the Staff of the SEC’s Office of Chief Accountant issued its final report on its Work Plan to study incorporation of International Financial Reporting Standards into the U.S. financial reporting system. The Staff’s report brought to a close the latest phase of the SEC’s long running exploration of possible adoption of IFRS in the US.

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  • FASB Drops Contingency Disclosure Project

    Author: Tom White

    Posted on: July 10, 2012

    On July 9, the Financial Accounting Standards Board brought to an end its longstanding project to consider expanding the disclosures to be included in financial statements about contingencies, particularly litigation contingencies. FASB initiated the project in 2007 based on concerns that companies’ disclosures were not adequately informing financial statement users about the potential impact of litigation on a company’s financial condition.

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