October 28, 2014

Coming Next Year: SEC Concept Release on Audit Committees

For those practicing long enough, you will recall that the commencement of the SEC’s foray into modern corporate governance kicked off a few years before Sarbanes-Oxley – then-Chair Arthur Levitt focused on audit committees in the late ’90s. This focus culminated in a Blue Ribbon Commission on Audit Committee Effectiveness established in ’98 by the NYSE & NASD, whose report led to a reform pushed by the SEC. It now looks like the audit committee will again be the focus of the SEC, building on work that the PCAOB has been doing for a while (here’s a new speech by the PCAOB’s Jay Hanson about audit committees).

As noted in this Cooley blog (working off this Compliance Week article):

Chair Mary Jo White, speaking before the Investor Advisory Group of the PCAOB, said that the SEC plans to issue a concept release in early 2015 “exploring possible avenues for elevating the work of public company audit committees.” The release is expected to address many of the issues that the PCAOB is examining, particularly those relating to the relationship between the audit committee and the independent auditors. White emphasized that she “’can’t overstate the importance of the audit committee functioning at the highest possible level.’”

SEC Approves PCAOB’s Related Party Transaction Changes

As noted in this Gibson Dunn blog, the SEC issued this order last week approving the PCAOB’s new related-party transaction standards. Notably, the SEC retained the PCAOB’s proposed effective date – so the new standards will become effective for audits for fiscal years beginning on and after December 15, 2014. In our “Related Party Transactions” Practice Area, we have posted memos regarding these new standards.

CFO Sues Former Employer for Defamation Over Earnings Forecast Error

In this Chicago Tribune article, it’s reported that a former Walgreens CFO has sued the company for blaming him for an earnings forecast error – a $1 billion error for which he was terminated.

– Broc Romanek