October 8, 2010

Cutting Corners During the Downturn: The New PCAOB Report

The PCAOB recently issued a report collecting findings from inspection reports concerning how audit firms may have failed to comply with PCAOB standards while conducting audits during the economic crisis. In looking back over the past three years of audits, the PCAOB noted a number of areas where audits were found lacking, including:

– fair value measurements
– impairment of goodwill
– indefinite-lived intangible assets and other long-lived assets
– allowance for loan losses
– off-balance sheet structures
– revenue recognition
– inventory
– income taxes

On a positive note, the PCAOB did find that firms had made an effort to respond to increased risks posed by the economic crisis. The PCAOB also noted that it will be evaluating whether efforts by firms to address deficiencies identified in PCAOB inspection reports have actually reduced or eliminated the subsequent occurrence of the same deficiencies.

The areas identified in the PCAOB report will no doubt be areas of increased diligence as we go into the audit cycle for the upcoming 10-K season.

The Dodd-Frank Rulemaking Train Keeps Rolling: Now, Asset-Backed Securities

In accordance with Section 943 of the Dodd-Frank Act, the SEC re-proposed a rule from the Regulation AB proposals issued earlier this year which would require that “securitizers” disclose fulfilled and unfulfilled repurchase requests across all transactions. Further, the SEC proposed a new rule which would require that credit rating agencies include, in any report accompanying an asset-backed securities credit rating (including a preliminary rating), disclosures about representations, warranties, and enforcement mechanisms available to investors (as well as how the representations, warranties and enforcement mechanisms differ from those in similar securities). The SEC must adopt these rules by January 14, 2011, so it has a very short comment period – comments are due on November 15, 2010.

The SEC is keeping this scorecard of the regulatory actions that it has taken to date under its Dodd-Frank Act mandates.

September-October Issue: Deal Lawyers Print Newsletter

This September-October issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

– Drafting Board Minutes for M&A Transactions: Tips and Pitfalls
– The Lessons Learned: Poison Pills Post-Barnes & Noble
– Ripe for Disclosure? A 1933 and 1934 Act Analysis: Disclosure of Merger Negotiations
– DOJ and FTC Issue Revised Horizontal Merger Guidelines

If you’re not yet a subscriber, try a “Rest of ’10 for Free” no-risk trial to get a non-blurred version of this issue on a complimentary basis.

– Dave Lynn