Highlights of the 2017 AICPA conference on current SEC and PCAOB development
This Heads Up extracts key insights from this year’s three-day AICPA Conference on Current SEC and PCAOB Developments. The conference featured speeches by, and question-and-answer sessions with, members of the SEC, PCAOB, FASB, IASB, and other professional groups on current accounting, reporting, and auditing practice issues.
Change was in the air at the 2017 AICPA Conference on Current SEC and PCAOB Developments in Washington, D.C., with the FASB’s new standards on revenue recognition, leases, and credit losses (the “new GAAP standards”), and the PCAOB’s new auditor reporting model, dominating the conversation.
The new GAAP standards will not only change reported results but also significantly improve the disclosures for investors. Successful implementation of the guidance requires appropriate oversight by audit committees and the keen focus of registrants on identifying and applying appropriate changes to internal control over financial reporting (ICFR).
In addition to the financial statements themselves, the audit report that accompanies them will be significantly modified over the next few years as the requirements of the final standard on the auditor’s reporting model are phased in. While the new section that describes critical audit matters (CAMs) will not be required for this year-end, audit committees are encouraged to discuss the potential content of that section with their auditors to understand the nature and timing of CAMs that will be disclosed in the future.
Conference speakers also encouraged participants to remain diligent about cybersecurity and the need to keep abreast of technological developments such as distributed ledger (blockchain) technology. And of course no one could ignore the imminent prospect of sweeping U.S. income tax reform and the potential effect it may have on year-end financial reporting.
In their keynote address, SEC Chairman Jay Clayton and SEC Chief Accountant Wesley Bricker discussed the importance of the SEC’s three-pronged mission: (1) investor protection, (2) capital formation, and (3) market integrity. Mr. Clayton noted that efficient capital formation in the U.S. public markets gives the average retail investor — colloquially referred to as Mr. and Mrs. 401(k) — a cost-effective opportunity to invest in the growth of America. Mr. and Mrs. 401(k) are protected by a disclosure regime that is the foundation of our capital markets, and the audited financial statements are the bedrock of that regime. For 15 years, the PCAOB (with oversight by the SEC) has played a central role in improving audit quality. As PCAOB Chairman James Doty reminded conference participants, the mandatory audit “is the linchpin of trust that holds our system of public market capital formation together.”
Instead of delivering separate speeches, the SEC’s chief accountant and deputy chief accountants in the Office of the Chief Accountant (OCA) issued a joint statement (the “Joint Statement”) describing matters discussed at the deputy chief accountant panel discussion, including the new GAAP standards, interactions with other SEC divisions and offices, PCAOB matters, auditor independence, ICFR, audit committees, international accounting and auditing, and innovation.
These and other topics of discussion are summarized throughout this Heads Up.
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Heads Up newsletters, published as warranted, analyze important accounting developments, such as new FASB and IASB pronouncements or exposure drafts. Concise examples and answers to frequently asked questions assist readers in understanding and implementing the critical guidance.