Snapshot | February 2021
Friday, February 26, 2021
Exclusive Interview with Former SEC Chair Jay Clayton
CAQ Executive Director Julie Bell Lindsay sat down (virtually) with former SEC Chairman Jay Clayton for an exclusive conversation about the SEC under Clayton’s tenure.
- Audit quality is strong and getting stronger. According to Clayton, financial reporting and audit quality in the U.S. has never been more reliable. “It’s going to continue,” he said.
- SOX Works: Clayton called on other countries to look to regulations that are working in the U.S. based on the Sarbanes-Oxley Act, especially when it comes to the independent audit committee.
Refining regulations to keep up with market complexity: Under Clayton’s leadership, the SEC updated the 20-year-old auditor independence rules. The changes reflect the increasingly complex and “interconnected” market. Importantly, nothing the amended rules permit would have been found to impair auditor independence in the past, according to Clayton.
PCAOB board member Rebekah Goshorn Jurata echoed Clayton’s statements on independence during an interview with Catherine Ide, the CAQ’s Vice President of Professional Practice. Jurata explained what she thought about while voting in favor for the changes to PCAOB rules to conform with the SEC amendments, “after the lengthy [notice and comment period] by the SEC the PCAOB was able to come to the table and adopt conforming and targeted amendments…moving expeditiously.”
CAQ, AICPA Release New ESG Reporting and Attestation Roadmap
The new ESG roadmap provides tools to help independent auditors inform their clients’ approach to ESG disclosures, help clients determine whether to seek an attestation report on ESG information, and help determine how to report ESG information in a Securities and Exchange Commission (SEC) submission.
Why it’s important: The CAQ and the Association released the report at a watershed moment for ESG reporting. Investors, consumers, and other stakeholders increasingly make decisions based on companies’ ESG practices, companies increasingly report ESG information using established standards and frameworks, and the Biden Administration has made climate risk a focus of its policy agenda.
Annual FEI Research Foundation Study Finds Audit Scope and Fees Increased from 2018 to 2019
The study examined audit fees public companies paid to external auditors for integrated audit services for nearly 6,200 SEC filers. The report is also based on survey responses from more than 50 financial executives at public companies and an additional survey of 88 audit engagement partners. Our favorite takeaway? Most public companies indicated that in 2019, their external audit enhanced the quality of their financial reporting.
- Overall, the growth in average public company audit fees continued, increasing six percent from 2018 to 2019 primarily due to expanded audit scope.
- The implementation of new accounting standards was noted by FEI’s members as the most significant driver of the increase audit scope and fees (56%), followed by acquisitions (21%).
- 77% of public company respondents indicated that their auditor provided permissible insights in their most recently completed integrated audit.
- 87% of public company respondents indicated that they expect an increase in virtual meetings with the external auditor going forward as a result of the COVID-19 pandemic.
Last Chance to Register: Standing up the PCAOB
Have you, like us, found yourself wondering about the early history of the Public Company Accounting Oversight Board (PCAOB)? Travel back in time with the SEC Historical Society on March 2 at 12PM ET for a live broadcast uncovering the challenges and opportunities of being a new regulator, and of being newly regulated in the environment of the just-passed Sarbanes-Oxley Act.
The star-studded cast will feature founding PCAOB Board Members and public company audit firm representatives for a lively discussion. Register here.
ICYMI: Leading the Headlines
- Biden’s Candidate for SEC Chairman Is Expected to Be Tough on Companies (WSJ)
- Out with Trump’s SEC, In with Biden’s SEC (Reuters Tax)
- Ex-SEC Chair Urges World to Consider U.S. Accounting Reforms (Bloomberg Tax)
- Companies Brace Themselves for New ESG Regulations Under Biden (WSJ)
- As fraud rises, CFOs must approach numbers skeptically, report finds (CFO Dive)
- CAQ, AICPA publish ESG reporting roadmap (Accounting Today)