This Financial Reporting Update highlights key developments and issues that are relevant to Finance and Accounting Professionals.
Securities and Exchange Commission
On March 15th, the Securities and Exchange Commission (SEC) proposed amendments to update Regulation Systems Compliance and Integrity (SCI). The SCI were adopted in 2014 to address susceptibilities with technology in the U.S. securities markets.
Trading and technology have evolved a great deal since 2014. A greater reliance on evolving technologies have resulted from new types of registered entities that are highly dependent on interconnected technology entering the markets, as well as the increasing prevalence of remote workforces and outsourcing to third party providers.
To reflect developing technology in the markets, the proposed amendments would expand the scope of SCI entities to include “registered security-based swap data repositories, all clearing agencies that are exempt from registration, and certain large broker-dealers”.
The public comment period will remain open for 60 days after the proposed release being published in the Federal Register.
American Institute of Certified Public Accountants
On March 9th, the American Institute of Certified Public Accountants (AICPA) released the results from the first quarter AICPA & CIMA Economic Outlook Survey. The survey polls CEOs, CFOs, Controllers, and other CPAs.
Only about 23% of survey takers conveyed optimism about the U.S. economy over the next 12 months. This does, however, represent progress from last quarter, when only 12% of respondents expressed optimism. Inflation, rising interest rates and geopolitical concerns all continue to dampen the U.S. outlook. Additionally, about 90% of respondents said they were concerned about recessionary impacts, with 15% saying significantly so.
There are, however, some reasons for optimism this quarter:
- Business executives are now predicting slight profit growth of 0.6% over the next 12 months, a switch from either negative or zero growth expectations over the previous two quarters. Additionally, 12-month revenue growth projections are on the rise once again, going from an anticipated 2.1% rate last quarter to 2.6% this quarter.
- Business executives who expressed optimism about their own organizations’ prospects over the next 12 months increased to 47% (35% last quarter).
- 52% of business executives say they expect their companies to expand over the next 12 months, up from 47% last quarter.
Public Company Accounting Oversight Board
On March 28th, the Public Company Accounting Oversight Board (PCAOB) issued a proposed new standard for public comment, AS 1000, General Responsibilities of the Auditor in Conducting an Audit.
Since the PCAOB’s adoption of the interim standards in 2003, the auditing environment has continued to develop in many ways, including new PCAOB standards, new or revised independence requirements, and advancements in technology affecting the availability of electronic audit evidence and use of audit software.
If adopted, AS 1000 would reorganize and consolidate the interim standards that were adopted by PCAOB in April 2003. AS 1000 would also address the core principles and responsibilities of the auditor. The proposal is intended to bring improvements designed to reflect changes in the auditing environment, eliminate outdated language, and increase consistency throughout PCAOB standards. PCAOB requests public comment on the proposal by May 30, 2023.