Council of Institutional Investors

SEC Seeks Feedback on Audit Committee Disclosure
Thursday, July 9, 2015
by: Rosemary Lally

Section: CII Governance Alert

The SEC is seeking comments on a concept release it issued July 1 on disclosure requirements for audit committees.

Most of the current disclosure rules on this topic were adopted in 1999, leading many to question whether they are still adequate given the significant changes in the role and responsibilities of audit committees since that time. Many of these changes resulted from the Sarbanes-Oxley Act of 2002, enhanced listing requirements for audit committees, enhanced requirements for auditor communications with the audit committee arising out of the rules of the Public Company Accounting Oversight Board, and changes in practice, both domestically and internationally.

“Effective audit committee oversight is essential to investor protection and the functioning of our capital markets,” said SEC Chair Mary Jo White. “The way audit committees exercise their oversight of independent auditors has evolved and it is important to evaluate whether investors have the information they need to make informed decisions.”

The SEC release seeks comments to determine if it needs to improve disclosure on these and other topics:

• Information regarding communications between the audit committee and the auditor
• Frequency with which the audit committee wet with auditor
• Review of and discussion about auditor’s internal quality review and most recent PCAOB inspection report
• Audit committee’s process for appointing or retaining auditor
• How audit committee assessed the auditor
• Qualifications of audit firm and certain members of engagement team selected by the audit committee

The concept release also asks for feedback on whether some of the disclosure now required by the Public Company Accounting Oversight Board should become the purview of the SEC, specifically information related to the name of the engagement partner and the length of the auditor’s tenure.

The deadline for comments is September 8.
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