This Financial Reporting Update highlights key developments and issues that are relevant to Finance and Accounting Professionals.
Financial Accounting Standards Board
On July 12th, the Financial Accounting Foundation (FAF) posted its 2022 Annual Report on its website. The theme of this year’s report is “Standards That Work from Main Street to Wall Street,”. The report also celebrates the 50 year anniversary of the formation of the Financial Accounting Standards Board (FASB).
In addition to commemorating some of the Board’s biggest achievements and milestones over the past 50 years, the 2022 Annual Report also includes:
- Letters from FASB, GASB, and FAF leaders
- Highlights from 2022 FASB and GASB standards
- Complete 2022 management’s discussion and analysis and audited financial statements.
The full version of the report can be found here.
Securities and Exchange Commission
On July 26th, the Securities and Exchange Commission (SEC) adopted rules requiring registrants to disclose material cybersecurity incidents they encounter in addition to providing an annual disclosure of their cybersecurity risk management, strategy, and governance. The SEC has additionally adopted rules requiring foreign private issuers to provide disclosures as well.
“Whether a company loses a factory in a fire — or millions of files in a cybersecurity incident — it may be material to investors,” said SEC Chair Gary Gensler. “Currently, many public companies provide cybersecurity disclosure to investors. I think companies and investors alike, however, would benefit if this disclosure were made in a more consistent, comparable, and decision-useful way. Through helping to ensure that companies disclose material cybersecurity information, today’s rules will benefit investors, companies, and the markets connecting them.”
The new rules will become effective 30 days following publication of the adopting release in the Federal Register.
Association of International Certified Professional Accountants
On July 31th, the American Institute of CPAs (AICPA) announced the formation of an advisory group that will represent a broad spectrum of the accounting profession. This group is being tasked with developing strategies to address the talent shortage currently facing the profession, including accounting students who go on to earn a CPA license.
“The slowdown in young adults choosing accounting as a career is a collective problem for the CPA profession and requires a collective and inclusive solution,” said Susan Coffey, the AICPA’s CEO of public accounting and executive sponsor of the initiative. “We want to make sure we have a broad range of viewpoints and perspectives to help define the profession’s pipeline strategy moving forward. This deep, capable, and experienced group will play a critical role in guiding that conversation and subsequent call to action.”
The advisory group began meeting in July and will disclose its progress at the AICPA Fall Council meeting in October.
Public Company Accounting Oversight Board
On July 25th, the Public Company Accounting Oversight Board (PCAOB) released a new staff report which shows a rise in the number of audits with deficiencies at audit firms in 2022. The report, titled “Staff Update and Preview of 2022 Inspection Observations”, is based on inspections performed by the PCAOB on certain public company audits conducted by 157 audit firms in 2022.
According to this update, “PCAOB staff expects approximately 40% of the audits reviewed will have one or more deficiencies that will be included in Part I.A of the individual audit firm’s inspection report, up from 34% in 2021 and 29% in 2020”.
PCAOB chair Erica Y. Williams said of the report, “These findings are absolutely unacceptable, and audit firms must make changes to turn things around and live up to their responsibility to investors. The PCAOB will continue demanding firms do better, conducting transparent inspections, and bringing strong enforcement actions where appropriate.”