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Remember those halcyon days when Treasury Secretary Paulson was mostly concerned about the competitiveness of the US capital markets, rather than fighting 24/7 for the survival of the US capital markets? Well, back then when the Treasury Department’s time might have been better spent worrying about the systemic risks posed by credit default swaps or the looming mortgage crisis that was beginning to show its ugly face, the Treasury Department’s Advisory Committee on the Auditing Profession (ACAP) was established. In my view, it was always a little strange that the ACAP (which was headed by Arthur Levitt and Don Nicolaisen) was a Treasury Department creation, rather than a committee established by the SEC or the PCAOB, but then again I don’t think that Treasury has been too worried about stepping on the SEC’s toes.

On Friday, Treasury announced that the ACAP had adopted its Final Report. As noted in this Fact Sheet, the three principal areas of focus in the ACAP’s recommendations were human capital, firm structure and finances, and concentration and competition. A Draft Final Report has been posted, with the Final Report expected to be posted some time this week.

One of the areas that the ACAP studied which has garnered some attention over the past year is liability reform for accounting firms, however the Subcommittee on Firm Structure and Finances was unable to reach any consensus on recommendations in this area. Rather, the final report reflects the divergent views of the committee members on that topic.

Among the areas that the ACAP asks the SEC to consider are (1) amending Form 8-K disclosure requirements to characterize appropriately and report every public company auditor change, and (2) requiring disclosure by public companies of any provisions in agreements with third parties that limit auditor choice. The ACAP also asks the SEC and the PCAOB to undertake a number of other initiatives. The PCAOB issued a statement indicating that it welcomed the Committee’s recommendations, while the SEC issued no statement about the ACAP’s Final Report.

Back to the Drawing Board on Proposed FAS 5 Amendments

Last week, the FASB approved a recommendation from its Staff to reconsider the Exposure Draft issued last June that proposed significant changes to the reporting of loss contingencies under FAS 5. In deciding to reconsider the proposals, the FASB particularly noted comments that the proposed standard would compel defendants to waive their attorney-client privilege and disclose prejudicial information, as well as comments expressing implementation concerns with a potential effective date for fiscal years ending after December 15, 2008.

Now the FASB is seeking some volunteers to “field test” two alternative proposals using disclosure about already resolved lawsuits. A roundtable is also planned for the first quarter of 2009. The expectation is that a revised Exposure Draft will be considered in the first half of 2009, with a possible effective date for fiscal years ending after December 15, 2009.

No Change for SEC Filing Fees

Yesterday, the SEC issued a fee rate advisory indicating that when the new Federal fiscal year clicks over tomorrow, filing fees will remain at their current rates. I suspect the SEC will be operating under a continuing resolution for a while. It seems unlikely that Congress will be acting on budget legislation any time soon when the House can’t even pass the bailout bill.

Posted: The SEC’s Adopting Release for Cross-Border Deals

The SEC has finally posted its adopting release for cross-border deals. We have started to post memos on DealLawyers.com analyzing these rule changes.

– Dave Lynn