Public Policy and Technical Alert | September 2021

Thursday, October 7, 2021

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.


Dan Berkovitz named SEC general counsel; John Coates to leave SEC

The SEC announced that Commodity Futures Trading Commission (CFTC) Commissioner Dan Berkovitz has been named SEC General Counsel, effective November 1. He has been the CFTC commissioner since September 2018. John Coates will leave the agency in October and return to teaching at Harvard University. Michael Conley, currently the SEC’s Solicitor, will serve as Acting General Counsel upon Coates’s departure until Berkovitz joins the agency.


PCAOB announces 2021 Forum for Auditors of Small Business and Broker-Dealers

The PCAOB announced information regarding its 2021 Forum for Auditors of Small Businesses and Broker-Dealers. This year’s forum will be pre-recorded, and the content will be accessible via the PCAOB website beginning October 20, 2021. The recordings will include presentations by PCAOB staff from the Office of the Chief Auditor, the Division of Registration and Inspections, and the Division of Enforcement and Investigations. Additionally, there will be a presentation from staff of the Financial Industry Regulatory Authority.

PCAOB adopts rule to create framework for HFCAA determinations

The PCAOB adopted a new rule related to its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA). The rule provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. The rule establishes:

  • The manner of the PCAOB’s determinations;
  • The factors the PCAOB will evaluate and the documents and information it will consider when assessing whether a determination is warranted;
  • The form, public availability, effective date, and duration of such determinations; and
  • The process by which the PCAOB will reaffirm, modify, or vacate its determinations

PCAOB solicits additional public comment on proposed new requirements for lead auditor’s use of other auditors

The PCAOB issued a second supplemental request for comment on its proposal to strengthen requirements that apply to audits involving multiple audit firms. The comment period runs through November 30, 2021. The proposal is relevant to those audits that are issued by the lead auditor, but in part compiled by other auditors who assist the lead auditor. Working with other auditors from other audit firms can create challenges in coordination and communication. To address these challenges, the PCAOB previously issued a proposal to strengthen requirements regarding a lead auditor’s responsibilities for planning, supervising, and evaluating the work of other auditors. The stated aim of the proposal has been to increase the lead auditor’s supervision of the work of other auditors and to enhance the lead auditor’s ability to prevent or detect deficiencies in the other auditors’ work.


FASB proposes improvements to fair value guidance for equity securities

The FASB issued a proposed Accounting Standards Update (ASU) that would improve financial reporting for investors and other financial statement users by increasing comparability of financial information across reporting entities that have investments in equity securities measured at fair value that are subject to contractual restrictions preventing the sale of those securities. The amendments in the proposed ASU would clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. Stakeholders are encouraged to comment on the proposed ASU by November 14, 2021.


What do investors want to understand about risks, uncertainties, opportunities, and scenarios?

The Financial Reporting Council (FRC) published its latest project report on reporting on risks, uncertainties, opportunities, and scenarios. The report outlines what investors want to understand from corporate reporting on risks, uncertainties, opportunities, and the use of scenarios. It also includes several practical examples of corporate reporting that better meet investors’ needs and includes high-level insight into how investors would like reporting on resilience to develop.

IAASB: Audits of less complex entities consultation: Supplemental guidance on auditor reporting & mapping documents published

The International Auditing and Assurance Standards Board (IAASB) published new documents related to its open consultation on the audits of less complex entities. The documents include:

  • Proposed supplemental guidance on auditor reporting to provide further guidance on modifications and other changes to the auditor’s report when using the proposed standard; and
  • “Mapping” documents to help users navigate between existing, equivalent International Standards on Auditing and the requirements in the newly proposed International Standard on Auditing for Less Complex Entities.

FRC publishes review findings on Streamlined Energy and Carbon Reporting rules

The FRC published the findings of its review of reporting on emissions, energy consumption, and related matters under the new Streamlined Energy and Carbon Reporting (SECR) rules. The FRC’s review considered how a sample of companies and Limited Liability Partnerships had complied with the new SECR requirements, identified examples of emerging good practice, and outlined its expectations for future reporting.

FRC publishes review findings on companies’ viability and going concern disclosures

The FRC published the findings of its review of companies’ viability and going concern disclosures. The findings reveal several areas where viability and going concern reporting could be improved. In particular, the review found that:

  • The disclosure of inputs and assumptions used in forecast scenarios to support the viability and going concern assessments often lacked sufficient qualitative and quantitative detail; and
  • In some cases, there was evidence to indicate that significant judgments may have been applied in determining whether a company was a going concern or whether this was subject to material uncertainty, but these judgments were not identified or explained.

FRC: International Sustainability Standards Setting

The FRC published FAQs on International Sustainability Standards Setting. The FAQs are intended to inform UK company stakeholders of developments in sustainability standard setting by the International Financial Reporting Standards Foundation.

FRC: Have your say on proposals to strengthen the United Kingdom’s Audit Firm Governance Code

The FRC scheduled a webinar and a roundtable to discuss its consultation on proposals to update and strengthen the UK Audit Firm Governance Code. The webinar and roundtable will take place on October 19. The FRC is especially interested in hearing from:

  • Investors and users of audited accounts;
  • Finance directors;
  • Audit committee chairs and audit committee members; and
  • Academics.

IAASB: First-time implementation guide for ISQM 1 updated and reissued

The IAASB released an updated version of the First-time Implementation Guide for International Standard on Quality Management (ISQM) 1, “Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements,” which was previously issued on June 14, 2021. The update was made in response to questions the IAASB received on the illustrative table on page 89 of the original guide illustrating some scenarios relating to the evaluation of the firm’s system of quality management and related possible conclusions in accordance with paragraph 54 of ISQM 1.

IASB seeks stakeholders’ views on IFRS 9 review

The International Accounting Standards Board (IASB) requested feedback as part of the post-implementation review of the classification and measurement requirements in its financial instruments Standard, IFRS 9. IFRS 9, which has been in effect since 2018, specifies how a company is required to classify and measure financial assets and financial liabilities as well as some contracts to buy or sell non-financial items. The IASB’s request for information seeks information on the classification and measurement requirements in IFRS 9 and related disclosures.

​​​​The Center for Audit Quality (CAQ) is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high-quality performance by public company auditors; convenes and collaborates with other stakeholders to advance the discussion of critical issues that require action and intervention; and advocates policies and standards that promote public company auditors’ objectivity, effectiveness, and responsiveness to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs.

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 Matt Sickmiller, Senior Manager, Professional Practice (