Daniel (Dan) L. Goelzer


On June 1, the U.S. Public Company Accounting Oversight Board adopted a new auditing standard that will require auditor’s reports filed with the Securities and Exchange Commission to include a discussion of critical audit matters (CAMs) that arose during the audit. Auditor reports will also be required to include the year in which the auditor began serving as the company’s auditor. While the traditional pass-fail auditor’s opinion will also be retained, the addition of CAM reporting will fundamentally change the auditor’s report from a standardized document, with little variation across clients, to an individually-tailored report highlighting the most challenging aspects of each specific audit.

For companies that trade in the U.S. securities markets, one of the many public policy questions arising from the recent change in Administration is how President Trump’s promise to engage in significant deregulation will affect the Securities and Exchange Commission’s disclosure requirements. Some answers are beginning to emerge. During the past several weeks, Congress and the President have invalidated one controversial SEC disclosure rule, and the SEC has announced that two others are under reconsideration. Legislation is reportedly being drafted to scale back a fourth requirement.

Earlier this summer, the U.S. Securities and Exchange Commission adopted a new rule requiring disclosure of payments made by “resource extraction issuers” to governments. Securities Exchange Act Rule 13q-1 will require SEC-registered public companies that engage in the development of natural resources to file a report with the SEC disclosing payments to the U.S. federal government or to any foreign government for the commercial development of oil, natural gas, or minerals. Resource extraction issuers must comply with this rule for fiscal years ending on or after September 30, 2018. For calendar year companies, the first reports will be due at the end of May, 2019.

The U.S. Securities and Exchange Commission has embarked on a far-reaching review of its public company disclosure requirements. In a concept release issued on April 13, the SEC invited comments on how it could modernize Regulation S-K, the body of rules that spells out the business and financial information that SEC-reporting companies must disclose in annual and quarterly filings. The concept release is part of the SEC’s Disclosure Effectiveness Initiative, which is exploring ways to make disclosure more useful to investors. The comment period runs until July 21, 2016.