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Audit Response Letters and Reserve Issues
The Sarbanes-Oxley Act of 2002 (H.R. 3763) (“SOX”) was enacted as a means to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. SOX and the rules enacted thereafter affect how issuers of securities make disclosures, the protocols auditors use to audit their financial statements, and how lawyers respond to auditor requests for information regarding issuer loss contingencies. Among other things, SOX amended the Securities Exchange Act of 1934 (the “1934 Act”) and the Securities Act of 1933 (the “1933 Act”). Although SOX does have some specific provisions, and generally establishes some important public policy changes, it has been implemented in large part through rules adopted and to be adopted by the Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (“PCAOB”), which have impacted auditing standards and have increased scrutiny on auditors’ independence and procedures to verify company financial statement positions and representations. Further, while SOX is by its terms generally applicable only to public companies, its principles are being applied by the marketplace to privately held companies and nonprofit entities.
Divided SEC Approves PCAOB’s Quality Control Standard
The Securities and Exchange Commission (SEC) on September 9, 2024, voted 3-2 to approve the Public Company Accounting Oversight Board’s (PCAOB) new quality control (QC) standard that imposes a combination of principles-based and prescriptive requirements to make sure that audit firms have a robust QC system to better protect investors.
Divided SEC Approves PCAOB’s Quality Control Standard
The Securities and Exchange Commission (SEC) on September 9, 2024, voted 3-2 to approve the Public Company Accounting Oversight Board’s (PCAOB) new quality control (QC) standard that imposes a combination of principles-based and prescriptive requirements to make sure that audit firms have a robust QC system to better protect investors.