PCAOB Issues Its First Cooperation Policy Statement

On April 24, 2013, the Public Company Accounting Oversight Board issued its inaugural “Policy Statement Regarding Credit for Extraordinary Cooperation in Connection with Board Investigations.” The Policy Statement reiterates many of the themes of the SEC’s “Seaboard Report,” and therefore many may view it as largely plowing over well-trodden ground. But, the Policy Statement merits close attention, because it is the first such statement the Board has issued since it was formed, it sets forth specific examples of conduct that is likely to earn credit for cooperation, and it focuses specifically on the auditing profession.

The Policy Statement identifies three forms of “extraordinary” cooperation that could result in audit firms and/or individuals receiving credit in enforcement investigations:

  • self-reporting;
  • remedial or corrective action; and
  • substantial assistance.

According to the Board, “[a] firm or associated person may earn credit for self-reporting by making voluntary, timely and full disclosure of the facts relating to violations before the conduct comes to the attention of the Board or another regulator.” And, the sooner self-reporting is made, the more likely it will result in credit. The Board stressed, however, that self-reporting is “not eligible for cooperation credit” if it is “required by legal or regulatory obligations,” e.g., the auditor’s obligation under Section 10A of the Securities Exchange Act of 1934 to report a client’s illegal acts. Read More

PCAOB Expands Lines of Communication Between Auditors and Audit Committees

The Public Company Accounting Oversight Board (PCAOB)’s new accounting standard, Accounting Standard No. 16, seeks to bolster the relationship between audit committees and outside auditors, especially by encouraging ongoing, two-way tailored communications, as opposed to after-the-fact or boiler-plate notices. Auditing Standard No. 16, adopted August 15, 2012, was issued in light of requirements in Sarbanes-Oxley and the Dodd-Frank Act that relate to oversight and accounting, and replaces interim standards AU section 380 and AU section 310. The SEC is expected to approve the new rule, which could become effective as early as December of this year depending on the timing of SEC approval. Read More