Yesterday, the SEC published a concept release¹ “to seek public comment regarding audit committee reporting requirements, with a focus on the audit committee’s reporting of its responsibilities with respect to its oversight of the independent auditor.” The release is designed to gather constituent feedback about whether the existing audit committee disclosure requirements² should be updated or otherwise amended to better enable investors to (1) assess the audit committee’s performance and (2) make more informed investment and voting decisions about issues such as audit committee composition and the ratification of the independent auditor.

Although the SEC’s release is primarily focused on the relationship between the audit committee and the independent auditor, its scope is still extensive. The release requests comment on 74 questions grouped into three broad categories, addressing the audit committee’s (1) oversight of the auditor, (2) selection or retention of the auditor, and (3) consideration of the audit firm’s and engagement team’s qualifications. Respondents also are encouraged to comment on other aspects of the audit committee disclosures, “such as those related to roles and responsibilities, audit committee qualifications, oversight of financial reporting, or oversight of internal control over financial reporting.”

Comments on the SEC’s release must be submitted to the SEC within 60 days after its publication in the Federal Register.

In addition, on June 30, 2015, the PCAOB issued a supplemental request for comment³ and a concept release,⁴ which are intended to increase audit firm transparency and enhance audit committee oversight of auditors: 

• Supplemental Request for Comment: Rules to Require Disclosure of Certain Audit Participants on a New PCAOB Form:
  • The PCAOB seeks input on an approach for registered public accounting firms to disclose the following:
    • The name of the engagement partner on the current-year audit.
    • The names, country location of headquarters, and extent of participation of other public accounting firms involved in the audit (above a 5 percent threshold based on total audit hours). 
  • Such information would be filed with the PCAOB by registered public accounting firms on a new form and would be available in a searchable database on the PCAOB’s Web site. 
  • Comments on this document are due to the PCAOB by August 31, 2015.
• Concept Release on Audit Quality Indicators [AQIs] — Notice of Roundtable: 
  • The PCAOB is seeking input on a portfolio of 28 potential AQIs, related uses for and reporting of such AQIs, whether AQI usage should be mandatory or voluntary, the scope of the potential requirements, and the value of such indicators to audit committees, audit firms, investors, and regulators.
  • Comments on this document are due to the PCAOB on September 29, 2015. 
  • In addition to seeking formal feedback, the PCAOB plans to hold a public roundtable in the fourth quarter of 2015 to discuss views and comments related to the concept release.

Look for our upcoming Audit Committee Brief and Heads Up newsletters for additional details about the SEC and PCAOB releases and their possible implications for issuers. 

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1 SEC Release No. 33-9862, Possible Revisions to Audit Committee Disclosures.

2 Such requirements are principally stated in SEC Regulation S-K, Item 407, “Corporate Governance.”

3 PCAOB Release No. 2015-004, Supplemental Request for Comment: Rules to Require Disclosure of Certain Audit Participants on a New PCAOB Form.

4 PCAOB Release No. 2015-005, Concept Release on Audit Quality Indicators — Notice of Roundtable.