Audit Committee Insights | May 2022
Wednesday, May 25, 2022
There’s rarely a slowdown in the financial reporting realm. While year-end and Q1 filings are likely complete, audit committees are always busy and well into the current year. Read on for the latest developments to keep current.
We welcome input; please let us know what you think. Subscribe here so that you never miss an update from the CAQ.
EXTRA! EXTRA! SEC Extends Deadline for Comment Letters on Climate-Related Disclosures
The Securities and Exchange Commission extended the public comment period on the proposed rule to enhance and standardize climate-related disclosures for investors until June 17, 2022. This is good news for stakeholders evaluating the 500+ page proposed rule that has drawn significant interest from a wide breadth of investors, issuers, market participants, and other stakeholders.
Need a summary of the proposed rule? We covered this in our April edition, but it bears repeating. The SEC Fact Sheet is a good resource and a 3-page read. There are numerous webcasts summarizing the proposal such as this one from Deloitte (available on demand). And here’s an extract from PwC’s publication In The Loop, aptly titled, The SEC wants me to disclose what? The SEC’s climate disclosure proposal:
Have an opinion? Share your views. You can submit a comment letter directly to the SEC, contact a trade organization such as the National Association of Corporate Directors, share your views with your auditor or contact us at the CAQ!
PCAOB Updates Standard-Setting and Research Agendas
The new board announced its priorities via its updated standard-setting and research agendas. What’s not new? “Other Auditors” and “Quality Control” are still at the top of the list. Both projects have been active for some time. In addition, Data and Technology and Audit Evidence remain on the research agenda.
What’s new? The standard-setting agenda now has projects designated as “short-term” and “mid-term.” In addition to Other Auditors and Quality Control as noted above on the short-term list, the board has added:
- NOCLAR – This refers to Noncompliance with Laws and Regulations
- Attestations Standards
- Going Concern
On the Mid-term list is:
- Substantive Analytical Procedures
- Interim Ethics and Independence Standards
- Interim Standards
What are interim standards? Upon inception of the PCAOB, all AICPA auditing standards were adopted on an “interim” basis. Many standards have since been updated by the PCAOB. There remains 28 interim auditing standards, 6 interim ethics and independence standards, and 6 attestation interim standards. Are they broken? Not necessarily. But standards should be continuously evaluated and modernized. Therefore, it seems a good effort to take stock of these interim standards.
PCAOB Announces New Advisory Groups
The Board announced members of the Investor Advisory Group (IAG) and Standards and Emerging Issues Advisory Group (SEIAG). The IAG will meet on June 8th and SEIAG on June 15th. Of course, you are asking – how do you pronounced “SEIAG”? At the Board meeting to approve the final charters, board members referred to it as Sea (like to swim in the sea) – Ag (like short for Agriculture).
Have You Performed Your External Auditor Assessment?
The role of the audit committee is significant to both financial reporting and audit quality. It is a tenet of the Sarbanes-Oxley Act and a distinction of U.S. market regulations. One important role of the audit committee is evaluating the external auditor. While this can be informal or formal, the exercise is important. The CAQ’s 2021 External Auditor Assessment Tool is available for free to facilitate the discussion. The results will inevitably support and improve audit quality.
ICYMI: CAQ Public Policy and Technical Alert (PPTA), April 2022
Each month, the PPTA highlights and examines the regulatory, standard-setting, legislative, and broader financial reporting developments impacting the public company audit profession. The CAQ’s April Alert included these featured articles.
Statement from the SEC Chair: “Working on ‘team cyber’”
SEC Chair Gary Gensler delivered remarks before the Financial and Banking Information Infrastructure Committee and the Financial Services Sector Coordinating Council. In his remarks, Gensler explored the connection between cybersecurity and securities. He discussed the importance of strong cybersecurity, saying that “cyber relates to each part of the SEC’s three-part mission: investor protection, facilitating capital formation, and that which is in the middle, promoting fair, orderly, and efficient markets.” He touched on cybersecurity policy as well as security postures for financial sector SEC registrants, public companies, service providers, and the SEC itself.
PCAOB requests comment on the impact of auditing requirements related to estimates and specialists
The PCAOB issued a request for comment on the initial impact of new requirements for auditing accounting estimates and using the work of specialists. PCAOB Chair Erica Y. Williams said input is welcomed from “investors, audit committees, preparers, academics, audit firms, and others who use financial statements.” All comments should refer to Interim Analysis No. 2022-001, Estimates and Specialists Audit Requirements, and should be submitted no later than June 10, 2022.
Fun Facts About May (including Naked Garden Day)
Do you need some fun facts to brighten your day? Including some fun facts about the month of May?
- The birthstone of May is the emerald and the birth flowers for May are lily of the valley.
- Taurus (the bull) is the zodiac sign of May until the 20th, then Gemini (the Twins) is the sign from May 21 on.
- It was once considered bad luck to be marriedin May. There was even a saying “Marry in May and you’ll rue the day.”
- Handmade May baskets with candy goodies used to be delivered to friends on May 1st.
- The first Saturday in May is known as naked gardening day! (Mark your calendar for next year if you missed it…)
Questions and comments about Audit Committee Insights can be addressed to Vanessa Teitelbaum, Senior Director, Professional Practice (firstname.lastname@example.org). This newsletter is intended as general information and should not be relied upon as being definitive or all-inclusive. The CAQ encourages readers to refer to applicable rules, standards, guidance, and other resources in their entirety. All entities should carefully evaluate which requirements apply to their respective organizations. Check out the CAQ’s Audit Committee Resource Webpage for more information.