This afternoon, the SEC posted its proposed rule, “Interactive Data to Improve Financial Reporting.” As we reported following the SEC open meeting on May 14, the proposed rule would require XBRL reporting by public companies under a phased in approach. The comment deadline is August 1.
Separately, earlier today, the U.S. Treasury Advisory Committee on the Auditing Profession (ACAP) posted an Addendum to its Draft Report. (Thanks to ACAP member and former SEC Chief Accountant Lynn Turner for sharing this news.)
As we previously reported, ACAP posted its May 5 Draft Report for public comment, with a comment deadline of June 13. (See FEI summary of ACAP Draft Report.)
The Addendum to ACAP's report posted today adds 4 new issues relating to: (1) whether PCAOB should reconsider the form and content of the auditor’s report, (2) whether engagement partners (not just the ‘firm’) should sign audit reports, (3) whether audit firms should be required to make public a set of audited financial statements for their own firm, and (4) whether it would be appropriate to transfer to federal court jurisdiction certain claims against auditors and related issues regarding a uniform standard of care.
On this last point relating to liability reform, Bloomberg News’ Jesse Westbrook has already filed a report: “Treasury Panel May Propose Liability Reforms for Audit Industry.” Citing Adam Pritchard, a law prof at the University of Michigan Law School, Westbrook reports: “Moving the lawsuits to federal court would benefit accounting firms, because a defendant's legal damages are limited to their share of the fraud… Plaintiffs also have an easier time bringing cases in state court.” Additionally, Westbrook quotes Pritchard saying: ``There is a much higher standard for the plaintiffs to reach to be able to sue the accountants at all'' in federal courts.
Westbrook also includes this observation by Pritchard: ``If Levitt and Volcker, who are not seen as being overly business friendly, are signing on that indicates that there is a real problem that needs to be fixed.'' [Former SEC Chairman Arthur Levitt co-chairs ACAP with former SEC Chief Accountant Don Nicolaisen; former Federal Reserve Board Chairman (and former IASCF Chairman) Paul Volcker is a member of ACAP.]
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