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Snapshot | May 2021

Thursday, April 29, 2021

CAQ Releases Alert on SPACs

With more than 300 IPOs in the first few months of 2021, special purpose acquisition companies (SPACs) have exploded in popularity. Also known as “blank-check” companies, SPACs appeal to companies seeking to go public more quickly than is possible through conventional IPOs registered with the SEC.

However, SPACs also raise complex accounting, financial reporting and governance issues. The CAQ has issued an Alert with key considerations for auditors and audit committee members to ensure public company readiness, including:

  • The company’s financial reporting expertise;
  • compliance with internal control and corporate governance requirements;
  • compliance with stock exchange listing requirements such as internal audit; and
  • external auditor compliance with PCAOB standards and SEC auditor rules.

Why it matters: The SEC is taking a closer look at SPAC filings and disclosures and uncovering accounting errors. Given their increasing prevalence, auditors and audit committees should understand the unique risks and challenges of a private company entering the public markets through a merger with a SPAC.

In the News: PCAOB Issues Proposed Rule for Holding Foreign Companies Accountable Act (HFCAA)

This month, the PCAOB issued a request for public comment to a proposed rule related to the PCAOB’s responsibilities under the Holding Foreign Companies Accountable Act (HFCAA).

The background: Following a string of accounting fraud charges by the SEC, including against the now infamous coffeemaker Luckin, the Trump Administration signed the HFCAA into law, which banned certain foreign businesses whose audits have not been inspected by American regulators from U.S. exchanges.

Now, the PCAOB is presenting a framework to use when determining whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction. The proposed rule would establish:

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

Why it’s important: The PCAOB’s framework will have significant implications for auditing firms operating in certain foreign markets. The Board requests public comment on the proposal by July 12, 2021.

Watch: CAQ Discusses the Ongoing Challenge of Effective ESG Reporting and Data Disclosure (Webcast)

Margot Cella, Vice President of Research and Anti-Fraud Initiatives at the CAQ, joined a panel of experts at Ethisphere’s 2021 Global Ethics Summit to discuss ESG reporting and data disclosure. Watch the panel to learn more about the challenges of ESG reporting, how companies can more effectively disclose ESG data, and which standards and frameworks can be applied today.

 

ICYMI: Leading the Headlines