Last week, the SEC approved the PCAOB’s Auditing Standard No. 1, which is effective for auditors’ reports issued or reissued on – or after – May 24, 2004. Auditing Standard No. 1 requires that an auditor’s report issued in connection with any engagement performed in accordance with the auditing and related professional practice standards of the PCAOB state that the engagement was performed in accordance with “the standards of the Public Company Accounting Oversight Board (United States).” Formerly, such reports referred to Generally Accepted Auditing Standards (known as “GAAS”).
This new standard will impact various SEC rules and guidance, as well as the federal securities laws, that refer to GAAS and specific standards under GAAS, including related professional practice standards. In a related action, the SEC issued an interpretative release on May 14 ordering that, effective immediately, references in SEC rules and staff guidance and in the federal securities laws to GAAS or to specific standards under GAAS, as they relate to issuers, should be understood to mean the standards of the PCAOB plus any applicable rules of the SEC.
Additionally, companies that incorporate by reference a report previously filed with the SEC, rather than including a new report in the filing, would not need to include the otherwise-required reference to the standards of the PCAOB in the report incorporated by reference. The SEC intends to codify this interpretation in the near future.
Third-Party Liability Developments
Building on the lessons learned from the Lucent enforcement action that I blogged about on Tuesday, it was quite an interesting development that the SEC brought a third party claim against the officer of a company that was simply a purchaser of software from Lucent. Learn more in my interview with Ken Winer on SEC’s Lucent Enforcement Action and Third-Party Liability.
Proxy Season Trivia Question
What date is considered the peak of the proxy season (i.e. has the most annual meetings scheduled to be held)? Answer: Yesterday, the 20th – all downhill from here…or is it uphill?