Posts Tagged ‘PCAOB’

Achieving High Quality Audits to Promote Integrity and Investor Protection

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday November 16, 2013 at 9:06 am
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Editor’s Note: The following post comes to us from Jeanette M. Franzel, board member of the Public Company Accounting Oversight Board. This post is based on Ms. Franzel’s remarks at the NACD 2013 Board Leadership Conference, available here. The views expressed in this post are those of Ms. Franzel and should not be attributed to the PCAOB as a whole or any other members or staff.

I want to commend the NACD on its mission to “advance exemplary board leadership” with the compelling vision of aspiring to “a world where businesses are sustainable, profitable, and trusted; shareowners believe directors prioritize long-term objectives and add unique value to the company; [and] directors provide effective oversight of the corporation and strive to deliver exemplary board performance.”

Audit committees are instrumental in achieving this vision and maintaining public trust and investor protection through their oversight of corporate financial reporting and auditing. I would also like to recognize the important role and difficult jobs that each of you have as audit committee members in these oversight functions, as well as the many other areas that are being assigned to audit committees during a time of ever increasing business complexity and risk.

…continue reading: Achieving High Quality Audits to Promote Integrity and Investor Protection

PCAOB Proposes Significant Changes to Audit Standards

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, on Saturday August 24, 2013 at 9:40 am
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Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP. The following post is based on a Gibson Dunn alert by Ms. Goodman and Michael J. Scanlon.

Today, the Public Company Accounting Oversight Board (“PCAOB”) proposed for public comment two audit standards that, if adopted, would significantly change the audit report model, and dramatically expand the auditor’s responsibilities in reporting on management’s disclosures outside the financial statements. PCAOB Chairman Doty remarked that the proposed standards—running to almost 300 pages—mark a “watershed moment” for auditing in the United States.

The first proposal—The Auditor’s Report on an Audit of Financial Statements—moves well beyond the traditional audit report and would require the following additional statements:

…continue reading: PCAOB Proposes Significant Changes to Audit Standards

Strengthening Oversight of Broker-Dealers to Prevent Another Madoff

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Thursday August 1, 2013 at 9:23 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s statement regarding the SEC’s final rule concerning broker-dealer custody practices; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

The facts surrounding Bernie Madoff’s unprecedented fraud are well-known. Through a Ponzi scheme, he stole untold billions over decades. What is not as well-appreciated is that during the vast majority of this time, he operated solely as a registered broker-dealer. This led to the inevitable conclusion that the regulatory framework for broker-dealer custody required urgent strengthening.

The U.S. Securities and Exchange Commission (“Commission” or “SEC”) has finally adopted amendments to strengthen the framework governing broker-dealer custody practices to prevent another Madoff. The adoption of these amendments comes more than four and a half years after Madoff’s scheme came to light in December, 2008, and more than two years after they were proposed. As a Commissioner, I have often been asked about steps the Commission has taken to prevent another Madoff, and it has concerned me that these issues have not been addressed.

…continue reading: Strengthening Oversight of Broker-Dealers to Prevent Another Madoff

Reporting, Accounting, and Auditing in Financial Markets

Posted by Elisse Walter, Commissioner, U.S. Securities and Exchange Commission, on Thursday June 20, 2013 at 9:14 am
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Editor’s Note: Elisse B. Walter is a Commissioner at the U.S. Securities and Exchange Commission and was the Chairman of the SEC from December 2012 to April 2013. This post is based on Commissioner Walter’s recent remarks at the SEC and Financial Reporting Institute Conference, available here. The views expressed in this post are those of Commissioner Walter and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

You may not hear this too often from people outside your profession, but I have always had a passion for accounting and auditing. I think this has its roots in the time I spent with my father, who was a CPA and the CFO of a publicly-held company; he helped me begin to understand just how important accounting is to business and the financial system. Of course, in my more than two decades with the SEC, which included close to a decade in the Division of Corporation Finance, I have developed a deeper and more complete understanding of the critical role accounting and auditing professionals play in our capital markets.

And today, I am pleased to see that we are working to adapt and expand that role to serve investors and other stakeholders even more effectively in the years ahead, by addressing critical issues at a moment of great change and important progress in the worlds of finance and accounting.

…continue reading: Reporting, Accounting, and Auditing in Financial Markets

Challenges Facing the Audit Profession and PCAOB Initiatives

Posted by James R. Doty, Chairman, Public Company Accounting Oversight Board, on Thursday May 2, 2013 at 9:40 am
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Editor’s Note: James R. Doty is chairman of the Public Company Accounting Oversight Board. This post is based on Chairman Doty’s keynote address at the Rice University Director-to-Director Exchange; the full text, including footnotes, is available here. The views expressed in the post are those of Chairman Doty and should not be attributed to the PCAOB as a whole or any other members or staff.

As you know, over the past couple of years, together with the board members and staff of the Public Company Accounting Oversight Board, I have been working to enhance the reliability of the external audit function and its usefulness to U.S. capital markets.

I will start off with an overview of some of the more significant issues confronting the audit profession. And then I’d like to open a more interactive discussion.

I. Corporate Governance Has Evolved to Suit the Needs of Capital Markets.

I have known many of you for years. I have watched and admired how you have navigated the many changes we have seen in both the energy industry and corporate governance.

Many of us have gained significantly more experience than we expected in identifying, addressing and preventing future threats to corporate success, such as differences in cultural expectations and business practices around the world and at home. Enron had a profound effect on Houston.

As this morning’s discussion demonstrated, you recognize that your work is never done. There is no perfect governance regime for all time.

…continue reading: Challenges Facing the Audit Profession and PCAOB Initiatives

Enhancing the Relevance, Credibility and Transparency of Audits

Posted by James R. Doty, Chairman, Public Company Accounting Oversight Board, on Monday December 17, 2012 at 9:13 am
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Editor’s Note: James R. Doty is chairman of the Public Company Accounting Oversight Board. This post is based on Chairman Doty’s remarks before the AICPA National Conference on Current SEC and PCAOB Developments, available here. The views expressed in the post are those of Chairman Doty and should not be attributed to the PCAOB as a whole or any other members or staff.

I. High Quality, Independent Auditing is Critical to Our Economic Success.

As I have learned in this job, getting the accounting right is indeed not the same thing as getting the auditing right. My sense from accountants I talk to is that auditing is receiving well-deserved attention in its own right.

Our economic success depends on the confidence of the users of capital and the providers of capital alike. Corporate managers hire internal accountants — many of you here today — to ensure they have accurate and detailed information on which to base management decisions. Managers ignore opportunities to glean trends and insights from this data at their peril.

Mistakes in this information can send a company into a business line or market that squanders resources. We now know that the true cost of financial misstatement is much greater than stock market fallout, concomitant lawsuits and insurance claims.

…continue reading: Enhancing the Relevance, Credibility and Transparency of Audits

PCAOB Regulatory Initiatives

Posted by James R. Doty, Chairman, Public Company Accounting Oversight Board, on Saturday December 1, 2012 at 9:03 am
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Editor’s Note: James R. Doty is chairman of the Public Company Accounting Oversight Board. This post is based on Chairman Doty’s remarks at the Practising Law Institute’s 44th Annual Securities Regulation Conference, available here. The views expressed in this post are those of Chairman Doty and do not necessarily reflect the view of the PCAOB as a whole or any other Board members or staff.

I am here to talk about the regulatory initiatives of the Public Company Accounting Oversight Board. The PCAOB is deeply engaged in examining ways to enhance the relevance, credibility and transparency of the audit to better serve investors.

The auditing profession has developed a highly skilled body of experts capable of analyzing accounts in a way that draws out truths and insights and sheds light on confused or misleading claims. It plays an indispensable role in making our capital markets fair and strong.

But I believe we are in a high risk period that merits more attention to the audit, not less. When companies make lay-offs, as we’ve seen recently, they often affect the internal audit and compliance staff — the first line of defense for fraud and other corporate malfeasance. This should be a concern to the legal community.

Although we have never needed it more, the audit too has, in the minds of some, become a commodity to be contained with other compliance costs.

In the United States, large audit firms’ revenues from consulting are growing 15 percent a year. Audit fees have stagnated at, basically, the inflation rate. Thus audit practices have shrunk in comparison to audit firms’ other client service lines.

This can weaken the strength of the audit practice in the firm overall. The problem is compounded when audit firms turn their talents to other endeavors that may further damage public views on the relevance and value of audit.

To be relevant, the auditor must speak to and for investors. Fair or not, that is in question today.

…continue reading: PCAOB Regulatory Initiatives

Protecting Investors through Independent, High Quality Audits

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday November 12, 2012 at 11:17 am
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Editor’s Note: The following post comes to us from Jeanette M. Franzel, board member of the Public Company Accounting Oversight Board. This post is based on Ms. Franzel’s remarks at the NACD 2012 Board Leadership Conference, available here. The views expressed in this post are those of Ms. Franzel and should not be attributed to the PCAOB as a whole or any other members or staff.

I want to commend the NACD on its mission to “advance exemplary board leadership” and on the extensive training and resources devoted to leading practices for board members, including audit committees and other specialized board committees.

The principal elements of the Sarbanes-Oxley Act — strengthening the role of audit committees, establishing the PCAOB to oversee auditors, and enhancing auditor independence and corporate accountability — aligned the interests of the PCAOB and audit committees. We both focus on auditor oversight to help ensure independent, high quality, and reliable audits to protect investors.

Recent questions about financial reporting and auditing, as well as related regulatory initiatives in the U.S. and around the world, highlight the benefits of and need for greater communications between regulators and audit committees.

Today, following the recent financial crisis, we find ourselves once again evaluating how best to protect investors through high quality financial reporting and reliable audits.

As you know, in pursuing our core mission of protecting investors through audit oversight, the Board has a number of initiatives to consider improvements in major areas of audit practice. I’d like to provide an update on several of the Board’s key initiatives that have a direct impact on audit committees, including our concept release on auditor independence and audit firm rotation, the new auditing standard on communications with audit committees, and our recent informational release that deals with communications with audit committees about PCAOB inspection results.

…continue reading: Protecting Investors through Independent, High Quality Audits

Investor Protection through Audit Oversight

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday October 10, 2012 at 9:08 am
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Editor’s Note: The following post comes to us from Lewis H. Ferguson, board member of the Public Company Accounting Oversight Board. This post is based on Mr. Ferguson’s remarks at an SEC Financial Reporting Conference. The views expressed in this post are those of Mr. Ferguson and should not be attributed to the PCAOB as a whole or any other members or staff.

Anyone involved in the financial reporting process deals daily with the hard realities of complexity and rapid change — whether you are a preparer of financial statements, a board or audit committee member, an investor, an independent or internal auditor, a counselor, or a regulator.

Commercial activity is increasingly global. Some financial instruments and transactions are bafflingly complex with values that can only be estimated. Standard setters in the United States and abroad are moving away from historical cost accounting toward fair value accounting, requiring difficult estimates. There is a plethora of new rules and requirements growing out of the Dodd-Frank and JOBS acts in the United States, and all of this is happening in what since 2008 has been the most difficult global economic environment since the Great Depression of the 1930s.

Much as we struggle with these rapid changes and their complexity, regulators also struggle to see around the curve, to be prepared for what is coming tomorrow, and to have tools in their toolbox that will be appropriate for those challenges. In the next session of today’s conference, I will discuss a number of specific initiatives the PCAOB is undertaking to deal with some of these challenges, but in this address I want to focus on one specific area, the challenge of globalization and cross-border financial reporting, auditing and audit oversight.

…continue reading: Investor Protection through Audit Oversight

PCAOB: Protecting Investors and the Public Interest

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday October 3, 2012 at 8:45 am
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Editor’s Note: The following post comes to us from Jeanette M. Franzel, board member of the Public Company Accounting Oversight Board. This post is based on Ms. Franzel’s keynote address at the American Law Institute-Continuing Legal Education Group (ALI-CLE) conference on accountant’s liability. The views expressed in this post are those of Ms. Franzel and should not be attributed to the PCAOB as a whole or any other members or staff.

Since the Public Company Accounting Oversight Board was created 10 years ago by the Sarbanes-Oxley Act, the U.S. system of auditor oversight has been fundamentally reformed to better protect investors and the public interest.

In addition to creating the PCAOB, the Act also vested audit committees with expanded oversight of financial reporting and audit processes.

Initially, the Act was seen as an effort to address problems that appeared to be unique to the U.S., but after numerous financial reporting scandals erupted around the world, the U.S. model of audit regulation was adopted in varying forms in many other countries.

Following the recent financial crisis, we find ourselves in an era with new stresses on financial reporting and auditing around the world, and we are once again evaluating how best to protect investors in this environment.

…continue reading: PCAOB: Protecting Investors and the Public Interest

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