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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.

  • SEC Proposes Compensation Clawback Rules

    Authors: Tom White, Alan Wilson

    Posted on: July 15, 2015

    On July 1, 2015, the Securities and Exchange Commission voted 3-2 to propose new rules requiring national securities exchanges to establish listing standards requiring listed companies to develop, implement and disclose clawback policies.

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    Topics: News, SEC

  • PCAOB Requests Supplemental Comment on Rules to Require Disclosure of Engagement Partners and Audit Participants

    Authors: Tom White, Alan Wilson

    Posted on: July 15, 2015

    At an open meeting on June 30, 2015, the Public Company Accounting Oversight Board unanimously voted to publish a supplemental request for comment on potential rules to require the disclosure of certain audit participants on a new PCAOB Form AP.

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    Topics: Auditing, News, PCAOB

  • PCAOB Launches Audit Committee “Dialogue”

    Authors: Tom White, Alan Wilson

    Posted on: June 22, 2015

    As part of its audit committee outreach efforts, the Public Company Accounting Oversight Board has established a webpage called "Audit Committee Dialogue" focusing on recurrent areas of concern identified by the PCAOB over the course of its inspections of audit firms and identifying new risks that the PCAOB is monitoring.

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    Topics: Auditing, PCAOB

  • SEC Chief Accountant Will Not Recommend Adoption of IFRS in US

    Author: Tom White

    Posted on: May 20, 2015

    In May 7 remarks at Baruch College, SEC Chief Accountant James Schnurr appeared to acknowledge what many have expected for some time—it is unlikely the SEC will mandate the incorporation of International Financial Reporting Standards into US accounting standards.

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  • Addressing Cybersecurity Oversight in Audit Committee Charters

    Authors: Alan Wilson, Jonathan Wolfman

    Posted on: April 29, 2015

    Cybersecurity continues to emerge as a key risk that is attracting the attention of regulators and boards of directors. Companies take different approaches regarding how the board fulfills its oversight duty with respect to cybersecurity/data privacy risks.

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  • FASB Standard-Setting Update ~ April 2015

    Author: Tom White

    Posted on: April 29, 2015

    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 covers the Financial Accounting Standards Board's recent updates on consolidation and pushdown accounting, as well as other topics.

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  • KPMG Issues 2015 Global Audit Committee Survey

    Author: Alan Wilson

    Posted on: April 6, 2015

    In February, KPMG released its 2015 Global Audit Committee Survey, which reports on audit committee activities based on survey responses from 1,500 audit committee members across 35 countries. As the Survey notes, "the issues on the audit committee's radar don't change dramatically from year to year (and they probably shouldn't)...."

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  • PCAOB Issues Quarterly Standard-Setting Agenda, Adopts Auditing Standard Reorganization

    Author: Tom White

    Posted on: April 1, 2015

    The Public Company Accounting Oversight Board issued its quarterly standard-setting agenda on March 31. The current agenda items, some of which have been pending for some time, include: Going Concern; Audit Partner Identification; Auditor's Reporting Model; Supervision of Other Auditors and Multi-Location Audit Engagements. The PCAOB also approved a reorganization of its auditing standards.

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    Topics: Auditing, News, PCAOB

  • SEC Commissioner Calls for New Approach to Accounting Standards Convergence

    Author: Tom White

    Posted on: March 30, 2015

    In a March 26 speech at the Brooklyn Law School, SEC Commissioner Kara Stein discussed the long-running issue of whether the United States should move from US Generally Accepted Accounting Principles (US GAAP) to International Financial Reporting Standards (IFRS).

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  • PCAOB Member Emphasizes Role of Internal Audit in Protecting Investors

    Authors: Tom White, Alan Wilson

    Posted on: March 25, 2015

    In remarks at the Institute of Internal Auditors 2015 General Audit Management Conference held on March 9th, PCAOB Member Jeanette M. Franzel emphasized protecting investors through coordination of internal auditors, external auditors, and audit committees. Among other comments, Ms. Franzel noted concerns from audit committee members "around the increasing levels of stress in the system," and observed that "internal auditors are uniquely positioned to make significant contributions to audit committees as [audit committees] face the challenges of the current business environment and its related risks."

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    Topics: Auditing, PCAOB

  • WilmerHale Securities Chair McLucas Discusses SEC Enforcement Developments

    Author: Tom White

    Posted on: March 23, 2015

    In an article recently republished in the Harvard Law School Forum on Corporate Governance and Financial Regulation, Bill McLucas, Chair of WilmerHale's Securities Department, discusses key SEC enforcement activities in 2014 and gives his perspective on current trends.

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    Topics: News, SEC

  • SEC Probes Corporate Interactions with Whistleblowers

    Author: Tom White

    Posted on: March 3, 2015

    According to a recent news report, the SEC is requesting documents from companies as part of an agency probe into the potential silencing of corporate whistleblowers. The reported probe comes as SEC officials have expressed concerns about "pre-taliation"...

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    Topics: News, SEC

  • SEC Settles Dispute with Chinese Accounting Firms

    Author: Tom White

    Posted on: February 18, 2015

    The SEC and the Chinese accounting firms associated with the Big Four accounting firm networks have resolved their long-running litigation over the firms' failure to produce documents in connection with SEC investigations. The firms 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 2012.

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    Topics: News, SEC

  • SEC Proposes Hedging Disclosure Rules

    Author: Tom White

    Posted on: February 17, 2015

    As required by the Dodd-Frank Act, the SEC has proposed new rules requiring disclosure of policies permitting or prohibiting directors, officers and other employees to hedge their company’s equity securities...

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    Topics: News, SEC

  • Regulators Discuss Accounting and Auditing Developments at Annual AICPA Conference

    Author: Tom White

    Posted on: December 24, 2014

    The American Institute of Certified Public Accountants' annual conference on SEC and PCAOB reporting developments is always a fertile source of information about current regulatory issues affecting audit committees, auditors and issuers. There were a number of major topics discussed at this years' conference, held on December 8-10.

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  • FASB Standard-Setting Update ~ November 2014

    Author: Tom White

    Posted on: December 11, 2014

    Here is the most recent "Summary of FASB Developments" prepared by Randy McClanahan of Butler Snow LLP in Birmingham, Alabama, for the Fall Meeting of the ABA Business Law Section Law and Accounting Committee. Randy's summary covers the Financial Accounting Standards Board's recent updates on pushdown accounting and derivatives and hedging, as well as other topics.

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  • SEC Plans Concept Release on Audit Committee Disclosures

    Authors: Tom White, Alan Wilson

    Posted on: December 5, 2014

    The Securities and Exchange Commission plans to issue a concept release in early 2015 addressing possible changes in the audit committee disclosures in proxy statements. SEC Chair Mary Jo White disclosed this plan at the Public Company Accounting Oversight Board's meeting with the Board's Investor Advisory Group on October 20. According to Chair White, the SEC has already recognized "many of the same issues" regarding audit committees that were identified by the Investor Advisory Group, and the concept release should address many of them.

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  • PCAOB Investor Advisory Group Addresses Role of the Audit Committee

    Authors: Tom White, Alan Wilson

    Posted on: December 5, 2014

    The Public Company Accounting Oversight Board's Investor Advisory Group (IAG) was established to provide views and advice to the PCAOB on broad policy issues, and other matters that affect investors and are related to the work of the PCAOB. At the IAG's fifth-annual meeting on October 20, the IAG considered, among other topics, questions regarding the role and responsibilities of the audit committee.

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  • SEC Enforcement Actions Emphasize Importance of Stock Ownership Reporting Obligations

    Author: Tom White

    Posted on: November 30, 2014

    The SEC recently initiated a number of enforcement actions against public companies and insiders for failing to comply with the stock ownership disclosure rules in sections 13(d) and 16(a) of the Securities Exchange Act. Our article on this development, "Keeping Current: SEC Enforcement Actions Emphasize Importance of Stock Ownership Reporting Obligations for Public Companies and Insiders," by Meredith Cross, Douglas Davison, Cynthia Mazareas and Knute Salhus, was published in the November 2014 edition of Business Law Today. You can read the article here.

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    Topics: News, SEC

  • 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.

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    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 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.

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    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.

    Read More »

    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.

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    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.”

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  • 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