As part of the Center for Audit Quality’s (CAQ) ongoing effort to keep members and stakeholders informed on significant public policy and accounting matters, we are pleased to offer the Public Policy and Technical Alert (PPTA). Each month, the PPTA highlights and examines the regulatory, standard-setting, legislative, and broader financial reporting developments impacting the public company audit profession. Please note that the PPTA is intended as general information and should not be relied upon as being definitive or all-inclusive. The CAQ encourages member firms to refer to the rules, standards, guidance, and other resources in their entirety at the hyperlinks provided below. All entities should carefully evaluate which requirements apply to their respective organizations.
In This Issue
SEC Adopts Rules to Enhance Investor Protections Relating to SPACs, Shell Companies, and Projections
The SEC adopted new rules and amendments to enhance disclosures and provide additional investor protection in initial public offerings by special purpose acquisition companies and in subsequent business combination transactions between SPACs and target companies (de-SPAC transactions). The new rules and amendments require, among other things, enhanced disclosures about conflicts of interest, SPAC sponsor compensation, dilution, and other information that is important to investors in SPAC IPOs and de-SPAC transactions. The rules also require registrants to provide additional information about the target company to investors that will help investors make more informed voting and investment decisions in connection with a de-SPAC transaction. In connection with de-SPAC transactions, the rules include disclosure requirements related to projections, including disclosure of all material bases of the projections and all material assumptions underlying the projections. The rules also update and expand guidance on the use of projections in all SEC filings.
The adopting release is published on SEC.gov and will be published in the Federal Register. The rules will become effective 125 days after publication in the Federal Register.
A PCAOB Staff Report Provides Insights and Reminders for Auditors Regarding Potential Factors Contributing to High Deficiency Rates in Broker-Dealer Engagements
The PCAOB posted a staff report on the Board’s interim inspection program related to audits of broker-dealers. The Spotlight Report offers insights and reminders for auditors regarding potential factors contributing to high deficiency rates in broker-dealer engagements.
AICPA Shares Plan to Strengthen Accounting Pipeline
As a subset of its broader work to support a profession-wide, multi-stakeholder effort to address hurdles to attracting and retaining accounting talent, the AICPA released its updated Pipeline Acceleration Plan in early 2023. The Pipeline Acceleration Plan continues to drive the AICPA’s efforts to increase both student interest in accounting as a profession and the number of accounting graduates who go on to obtain licensure. A Winter 2024 update provides an in-depth overview of the status of all the initiatives.
CPAs Inspire the Next Generation in High School Classrooms
The AICPA announced preliminary reporting from the participating state CPA societies indicates the second-annual Accounting Opportunities Week event surpassed the 2022 results. Accounting Opportunities Week was retitled “Accounting Opportunities Experience” in 2023 and expanded to encompass the full month of activities planned in November. The Accounting Opportunities initiative is a collaboration among state CPA societies and AICPA & CIMA to raise awareness of accounting career opportunities among high school students. Some objectives of the initiative include:
- Highlighting Career Paths in Accounting
- Breaking Down Stereotypes
- Offering Interactive Sessions
- Promoting Diversity in Accounting
AICPA & CIMA Offer Series Focused on Latest Audit and Accounting Developments
AICPA & CIMA announced that they will begin offering a monthly series of town hall-style discussions focused on audit and accounting. The AICPA A&A Focus Series is designed to keep members up to date on developments and critical issues in accounting, auditing and assurance. The first live, one-hour broadcast took place on Jan. 10. The series aims to help auditors:
- Recognize the latest news and most pressing issues facing A&A practitioners
- Recall critical information on important trends and regulatory activities
- Identify practical and technical analysis of current topics
- Access helpful resources and tools
IAASB Opens Public Consultation on Narrow Scope Amendments to Meet Expectations for Public Interest Audits
The International Auditing and Assurance Standards Board launched a consultation process on proposed narrow scope amendments to achieve greater convergence with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (Including Independence Standards). Key proposed revisions include extending the scope of the entities included under the International Standards on Quality Management and the International Standards on Auditing such that they will be subject to:
- Engagement quality reviews;
- Providing transparency in the auditor’s report on specific aspects of the audit, including
auditor independence, communicating key audit matters, and the engagement
partner’s name; and - Communicating with those charged with governance to help them fulfill their
responsibility overseeing the financial reporting process, (e.g., communicating about
quality management and auditor independence).
Feedback on the Exposure Draft is requested by April 8, 2024.
FRC Publishes Guidance for UK Corporate Governance Code 2024
The FRC published targeted and digitally accessible guidance to support companies applying the UK Corporate Governance Code 2024, launched earlier this month. The guidance is split into sections which align with the Code;
- Board Leadership and Company Purpose
- Division of Responsibilities
- Composition, Succession, and Evaluation,
- Audit, Risk, and Internal Controls
- Remuneration
For the first time there is a new section covering good practice for the successful management of board committees. Other new additions include reference to;
- Outcomes based reporting
- Board performance reviews
- Audit Committees and the External Audit: Minimum Standard
- The determination material controls
- Declaration of effectiveness of material controls
IESBA Launches Public Consultation on New Ethical Benchmark for Sustainability Reporting and Assurance
The IESBA announced the launch of two Exposure Drafts:
- International Ethics Standards for Sustainability Assurance ED, which includes
revisions to the existing Code related to sustainability reporting; - Using the Work of an External Expert ED
The Exposure Draft on International Ethics Standards for Sustainability Assurance (including International Independence Standards) and ethics standards for sustainability reporting proposes a clear framework of expected behaviors and ethics provisions for use by all sustainability assurance practitioners regardless of their professional backgrounds, as well as professional accountants involved in sustainability reporting. The Exposure Draft on Using the Work of an External Expert proposes an ethical framework to guide professional accountants or sustainability assurance practitioners, as applicable, in evaluating whether an external expert has the necessary competence, capabilities and objectivity in order to use that expert’s work for the intended purposes. Comments on the Using the Work of an External Expert ED are requested by April 30, 2024, and on the Sustainability ED by May 10, 2024.
January 2024 IASB and Joint IASB-ISSB Update Now Available
The IASB announced the January 2024 IASB Update is now available. The January 2024 joint IASB-ISSB Update is also now available, where both boards discussed feedback on the ISSB Consultation on Agenda Priorities. The IFRS Foundation work plan has also been updated.
FRC Takes Systemic Look at Barriers to Competition in UK Audit Market
The FRC published a summary of key findings and potential actions from research it commissioned into barriers to entry and growth faced by audit firms in the UK. The report highlighted capacity constraints, recruitment and retention challenges, alongside regulatory requirements, as the main obstacles for smaller firms looking to expand their presence — especially in audits of public interest entities. The FRC plans to conduct further market studies to deepen understanding of audit market dynamics from a resilience perspective.
Association of Certified Fraud Examiners Joins the Anti-Fraud Collaboration in a Strategic Move to Enhance Fraud Prevention and Detection
The CAQ and the Association of Certified Fraud Examiners announced that the ACFE has joined the Anti-Fraud Collaboration, a collective effort of industry leaders committed to strengthening the fight against fraud across the financial reporting supply chain. The inclusion of the ACFE in the AFC marks a significant milestone in their shared mission to foster collaboration across the financial reporting supply chain in the interest of protecting investors in U.S. capital markets. The ACFE, a globally recognized authority in fraud examination, brings strong expertise and insights to the AFC, further bolstering the collaboration’s ability to address the evolving challenges of fraud prevention and detection. The Collaboration plans to release several new resources in 2024 focused on culture and emerging technologies, as well as highlight key findings from the ACFE’s biennial research study as a part of this new partnership, Occupational Fraud 2024: A Report to the Nations.
CAQ Alert 2024-01: Amendments to PCAOB Standards Related to Supervision of Other Auditors
The CAQ prepared an Alert to support auditors in planning audits of fiscal years ending on or after December 15, 2024. On June 21, 2022, the PCAOB issued Release 2022-002, in which the Board adopted amendments to its auditing standards to strengthen requirements for planning and supervising audits involving accounting firms and individual accountants (“other auditors”) outside the accounting firm issuing the auditor’s report (the “lead auditor”). This Alert provides an overview of the provisions to assist auditors and other stakeholders with understanding and applying the standards and the key changes included in the amendments. This Alert is structured as follows:
- Who will be affected and what is the effective date?
- What are the objectives and reasons for the changes?
- What are the key changes?
- How might this impact you?
- What can you do to prepare?
- Resource links
The Center for Audit Quality is a nonpartisan public policy organization serving as the voice of U.S. public company auditors and matters related to audits of public companies. The CAQ promotes high quality performance by U.S. public company auditors; convenes capital market stakeholders to advance the discussion of critical issues affecting audit quality, U.S. public company reporting, and investor trust in the capital markets; and using independent research and analyses, champions policies and standards that bolster and support the effectiveness and responsiveness of U.S. public company auditors and audits to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs. For more information, visit www.thecaq.org.
The CAQ Public Policy and Technical Alert (PPTA) is intended as general information and should not be relied upon as being definitive or all-inclusive. As with all other CAQ resources, this is not authoritative and readers are urged to refer to relevant rules and standards. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The CAQ makes no representations, warranties, or guarantees about, and assumes no responsibility for, the content or application of the material contained herein and expressly disclaims all liability for any damages arising out of the use of, reference to, or reliance on such material. This publication does not represent an official position of the CAQ, its board, or its members.
Questions and comments about the Public Policy & Technical Alert can be addressed to Vanessa Teitelbaum, Senior Director, Professional Practice (vteitelbaum@thecaq.org).