On December 30, 2019, the SEC issued a Statement of the Chairman, the Director of the Division of Corporation Finance and the Chief Accountant to remind audit committees, in anticipation of the year-end financial reporting season, of their responsibilities and to assist them by identifying some specific areas of focus. In doing so, the Statement emphasizes the significant role of audit committees in ensuring the integrity of financial reporting of the companies they serve. Issuance of the Statement follows the release by the Public Company Accounting Oversight Board (PCAOB) earlier in December of a summary of its conversations with audit committee chairs. The PCAOB summary covers such topics as what is working well from the perspective of audit committee chairs, the role of audit quality indicators (AQIs), the relationship and communications with auditors, dealing with new auditing and accounting standards and addressing critical audit matters (CAMs).
Among the SEC Statement’s observations are the following:
Specific matters identified by the SEC Statement for attention by the audit committee include:
Another matter that is identified in the PCAOB summary although not addressed in the SEC’s Statement is the role of the audit committee in dealing with cybersecurity and other technology risks, particularly as they impact the financial statements. The SEC has separately addressed the need for companies to focus on these risks in other guidance, including the oversight role of the board and the need for effective controls and procedures.
The SEC Statement, as well as the PCAOB summary, provide important guidance and insights that should be brought to the attention of and considered by members of public company audit committees.
 See, e.g., SEC Division of Corporation Finance Disclosure Guidance: Topic No. 8 – “Intellectual Property and Technology Risks Associated with International Business Operations” here and Commission Statement and Guidance on Public Company Cybersecurity Disclosures, Release No. 33-10459 (Feb. 26, 2018) here.
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