April 28, 2017

SEC’s Chief Accountant: Watch Out for AC Overload

In a recent speech on enhancing audit committee effectiveness, SEC Chief Accountant Wes Bricker raised the topic of audit committee overload – and said the onus is on the board to address it:

Recent surveys indicate that some audit committees are finding it difficult to perform its core responsibilities while covering other major risks on its agenda. For example, a recent Corporate Directors survey by an audit firm suggests that while 75% of directors say their workload is manageable, only 57% of audit committee members say their workload is manageable.

Among audit committee members, the survey results are more pronounced in certain industries. For example, in the banking & capital markets sector, only 34% of audit committee members surveyed indicated they believe their workload is manageable.

This emphasizes the importance of the role of the board in driving the audit committee’s focus and responsibilities. Directors should ask themselves if they are identifying the risk of audit committee overload – and if so, are they appropriately managing this risk to enable the audit committee to operate effectively.

While acknowledging that audit committees may be equipped to play a role in overseeing risks that extend beyond financial reporting, Bricker stressed the importance of audit committees not losing focus on their core roles & responsibilities.

New Accounting Standards: Don’t Forget to Disclose Material Changes in ICFR!

This “SEC Institute blog” points out another topic addressed in Wes Bricker’s speech.  Here’s an excerpt:

In his recent, much publicized speech, Chief Accountant Wesley Bricker discussed the transition to the new revenue recognition standard. A bit later in the speech he addressed a not so frequently discussed issue, the requirement to disclose material changes in ICFR as it relates to implementation of the new revenue recognition, leases, credit losses and other standards.

The blog goes on to review line-item disclosure requirements that could be triggered by changes to ICFR made in connection with the implementation of the various new accounting standards that are bearing down on companies like a freight train.

Nobody’s Perfect: Glitches in New Cover Pages

I should preface this by saying that I once published a 12-page “Corporate Governance Advisor” article in which I referred to “emerging growth companies” as “ECGs” throughout instead of as “EGCs,” so I’m an expert when it comes to imperfections. With that being said, I feel obligated to report that folks have flagged a few glitches in the SEC’s recently revised forms.

As Keith Bishop noted a few weeks ago, the language adding a box for EGCs on the cover of the new 10-K & 10-Q forms has led to confusion over whether companies that are both EGCs & accelerated filers should check one or two boxes.  Fortunately, this blog from Jay Knight confirms that Corp Fin has informally said that these companies should check both boxes.

More recently, a member pointed out that the pdf of the new Form S-3 on the SEC’s website has a typo in it. Instead of saying “…indicate by check mark if the registrant has elected not to use the extended transition period for complying with…” (which is what the adopting release said, and is also what all of the other pdf versions updated to date say), Form S-3 says “…for comply with…”

John Jenkins