TheCorporateCounsel.net

The comment period for the PCAOB’s controversial “NOCLAR” proposal expired in August, and that means the big question is “what happens now?”  This Bass Berry blog has some thoughts on the answer to that question:

Now that the comment period has closed, the PCAOB will determine whether or not to adopt final rules and whether or not the final rules will make changes to the Proposal. Any final rules adopted will be submitted to the Securities and Exchange Commission (SEC) for approval. Pursuant to Section 107 of the Sarbanes-Oxley Act, proposed rules of the PCAOB do not take effect unless approved by the SEC.

Given that the Proposal has majority support at the PCAOB and that even the two dissenting members expressed support for certain aspects of the Proposal, we expect any final rules submitted to the SEC for approval to expand auditors’ responsibilities with respect to NOCLAR. In the meantime, the PCAOB’s clear focus on NOCLAR might cause auditors to be more demanding with respect to these matters, even under the current standard.

The blog recommends that companies reevaluate their existing legal compliance policies and procedures, consider how their audit committee will evaluate information that auditors may provide about potential non-compliance with laws and regulations and how the company will respond for requests from auditors dealing with non-compliance, particularly if the information sought is privileged.

– John Jenkins