PCAOB Expands Standard-Setting and Research Agendas
By Thomas W. White, Retired Partner, WilmerHale
In another expected initiative, the reconstituted Public Company Accounting Oversight Board recently posted revised agendas describing its current plans for standard-setting and research regarding auditing and related professional practice standards for audits of public companies and broker-dealers. According to the Board’s release, the agendas “are the result of the new Board’s assessment of priorities that advance audit quality to protect the interest of investors” and “represent the Board’s focus to modernize, simplify, and enhance our professional standards.”
Based on the standard-setting agenda, the PCAOB contemplates proposal or adoption within the next twelve months of standards in the following areas:
- Audit firm use and oversight of other auditors (adoption in 2022)
- Audit firm quality control systems (proposal in 2022)
- Noncompliance with laws and regulations (proposal in 2022)
- “Interim” attestation standards adopted upon establishment of the Board (proposal in 2022)
- Company’s ability to continue as a going concern (proposal in 2023)
- Audit confirmation process (proposal in 2023)
The standard-setting agenda also includes active projects where Board action is not contemplated in the next twelve months. These projects cover substantive analytical procedures, fraud, interim ethics and independence standards, and other interim standards. The research agenda has two projects: data and technology, and audit evidence.
The Board’s revised agendas follow a controversy about its 2020 action, under former Chairman William Duhnke, to remove several items from the standard-setting agenda. Investor advocates criticized these deletions, which included projects on noncompliance with laws and regulations and going concern. Those two projects have now been added back to the agenda.
SEC Posts Sample Comment Letter to Companies Regarding Disclosures Pertaining to Russia’s Invasion of Ukraine and Related Supply Chain Issues
By Alan J. Wilson, WilmerHale
Consistent with its recent practice regarding emerging developments, on May 3, the Securities and Exchange Commission (“SEC”) Division of Corporation Finance posted a sample comment letter regarding applicable disclosure considerations resulting from Russia’s invasion of Ukraine and the impact on an issuer’s business. The sample comments include general comments about the impact of Russia’s invasion of Ukraine on an issuer’s business, particularly its operations in the affected regions, as well as comments on risks relating to cybersecurity, known trends and uncertainties bearing on MD&A disclosure, non-GAAP measures, disclosure controls and procedures, and internal control over financial reporting.
The sample comment makes clear that the SEC Division of Corporation Finance “believes that companies should provide detailed disclosure, to the extent material or otherwise required” that relates to:
- direct or indirect exposure to Russia, Belarus, or Ukraine through their operations, employee base, investments in Russia, Belarus, or Ukraine, securities traded in Russia, sanctions against Russian or Belarusian individuals or entities, or legal or regulatory uncertainty associated with operating in or exiting Russia or Belarus,
- direct or indirect reliance on goods or services sourced in Russia or Ukraine or, in some cases, in countries supportive of Russia,
- actual or potential disruptions in the company’s supply chain, or
- business relationships, connections to, or assets in, Russia, Belarus, or Ukraine.