April 8, 2024

Capital Markets Pulse | March/April 2024

Capital Markets Pulse with Julie Bell Lindsay

Welcome to another edition of Capital Markets Pulse, a monthly newsletter from the Center for Audit Quality that brings you insights, resources, and tools on the latest issues impacting the capital markets.

A full court of regulatory developments – including the passage of the long-awaited final rule from the SEC on climate disclosures and the release of the PCAOB’s annual inspection report kept the profession busy. The CAQ also released our annual Audit Committee Practices Report and recognized Women’s History Month in March.

Speaking of courts, while the Buckeyes weren’t on one for March Madness this year, I’ll be looking forward to a stronger season next year.

Read on for what’s on my radar this month.

Please note that these perspectives are my own. If this email was forwarded to you, subscribe here so that you never miss a public company auditing update.  ​​​

On my radar

CAQ Updates

CAQ Responds to the SEC’s Final Climate Rule

The SEC, after months of stakeholder anticipation and engagement, in March released its long-awaited final climate rule. The CAQ with the AICPA aimed to better understand the components of the final rule and what the implications are for the profession. Key takeaways from this analysis include:

  • While ultimately less prescriptive than the proposal, the final Regulation S-K Requirements call for certain disclosures based on materiality, including Scope 1 and Scope 2 emissions for large accelerated (LAF) and accelerated filers (AF).
  • Per the final rule, LAFs and AFs must obtain limited assurance on GHG emissions disclosure beginning three years after the GHG emissions.
  • Registrants will include the financial statement (Regulation S-X) climate-related disclosures in a note to the audited financial statements. These disclosures fall within the scope of internal control over financial reporting (ICFR).

Ultimately, the CAQ supports the SEC in adopting the final rule, which recognizes the valuable role that assurance plays in bringing accountability and objectivity to company-reported climate disclosures. Whether greenhouse gas emissions or the impact of climate issues in company financial statements, we know that audit firms – with their deep understanding of company financial records, operations, business strategies, and internal controls – will bring their independence and objectivity in assuring this information.

For more information on the final rule, my colleague Desire Carroll and Anita Chan, Partner, Department of Professional Practice at KPMG, break down the new rules in this informative session:

CAQ Responds to NOCLAR

The CAQ has submitted a second comment letter in response to the PCAOB’s reopening of the comment period for its NOCLAR proposal. In the comment letter, the CAQ reinforced concerns raised in our original comment letter. The latest comment letter also includes:

  • Data we have compiled and analysis we have completed subsequent to our August 7, 2023, comment letter
  • Alternatives to the proposed requirements that should form the basis for further outreach and consultation by the PCAOB
  • Observations from the March 6, 2024 virtual roundtable

Read the full letter here.

Audit Committees Prioritize Cybersecurity, ERM

The CAQ released the results of our annual Audit Committee Practices Report, an annual survey we conduct with Deloitte’s Center for Board Effectiveness to better understand audit committee priorities.

With the threat of cybersecurity and other risks ever present, it came as no surprise that board members overwhelmingly cited cybersecurity as their number one priority, followed by enterprise risk management (ERM). And amid warnings of “AI-washing” and “green-washing” from Chair Gensler, board members continue to pay attention to trending topics AI and ESG reporting.

The report continues to show that the agenda and scope of audit committee members is evolving. To boost effectiveness, audit committee members should:

  • Increase discussion and/or engagement from members during meetings
  • Improve the quality of pre-read materials
  • And improve the quality of presentations during meetings

Download the full report: Audit Committee Practices Report 2024.

Recognizing Accounting Trailblazers for Women’s History Month

The CAQ observed Women’s History Month in March, an important opportunity to recognize the many strides that women have made in the workforce and education, where they now make up 60% of new college enrollees.

When it comes to accounting, women have made significant contributions to propelling the profession forward. In this guest blog for the CAQ from professor Kecia Williams Smith, Ph.D., CPA, she writes about women who have paved the way for other women in the accounting profession.

But, to keep women in accounting, more must be done, warns Mazars Partner Tifphani White-King of Mazars. With women holding only 39% of partnership positions in accounting, she lists empowering growth and reshaping perceptions of what being an accountant means as ways to address the current gap.

On a personal note, I had the opportunity recently to hear from finance leaders and speak about my career path at FEI’s “Icons: Women of Note 2024” conference. I was inspired by the stories I heard about these dynamic women’s journeys of personal leadership and reflected on what I have learned from my own career journey:

  1. We all have a role to play, no matter where we come from and what schools we attend.
  2. Don’t be afraid to admit what you don’t know or when you mess up. There will always be guidance when you need it.
  3. Rely on your community as your biggest supporter. Your community doesn’t need to be big, they just need to have your back.

Accounting+ Updates

Accounting+ Releases Annual Report

Two years ago, we launched Accounting+, a national campaign and platform focused on raising awareness of an accounting career at the high school and early college levels. With the collective dedication of our 46 partners, we have been able to demonstrably shift students’ ingrained misperceptions about accounting and created greater exposure to, and connection with, accounting careers.

In our recently released annual report, we highlight some of the extraordinary results we have seen since the campaign was launched, including:

  • Meeting students where they were – with 12+ million website visits and 65,000+ new subscribers who opted to learn more about accounting.
  • Reaching students in the classroom – over 40,000 during the 2022-23 academic year.
  • Statistically significant growth, with a 6% increase in both awareness and interest in accounting.

Download our full 2024 report for more on what Accounting+ has accomplished and what we plan to achieve in the coming year.

Profession Updates

PCAOB Releases Inspections

The PCAOB’s inspections are one part of a strong reporting and oversight ecosystem and have a two-fold purpose: To help public company auditors improve the quality of their audits and to protect investors.

Before the end of February, the PCAOB released 14 inspection reports. Included in this release were the 2022 inspection reports for the global network firms and some annually inspected firms. These reports contain the PCAOB’s findings from inspections they conducted in 2022 of 2021 audits.

The good news: Restatements remain incredibly low. In 2022, only two inspected audits – out of 390 – resulted in a restatement. This is followed by two years of no restatements at all as a result of an inspection in 2020 and 2021. This is a positive trend, particularly for investors, who have previously indicated that they are generally not concerned with inspection findings that do not result in a restatement.

In a blog, my colleague, Dennis McGowan, VP of Professional Practices, shares five principles he considers when reviewing inspection reports: Understanding the PCAOB’s Latest Inspection Results: Five Guiding Principles for Audit Committees.

The Latest Episode of the Capital Markets Pulse Podcast

Speaking of Dennis, in the last edition of the Capital Markets Pulse Podcast, I had the pleasure of hosting him for a round robin on the latest headlines impacting the profession, including the SEC’s climate rule, the latest from the PCAOB as well as a personal conversation about the women in his life who inspired him to pursue a career in accounting.

​​​​​Listen to these podcast here: Podcast | Capital Markets Pulse, Episode 5.


Julie Bell Lindsay

Chief Executive Officer, CAQ