AICPA Conference Recap - Global Accounting Matters

AICPA Conference Recap - Global Accounting Matters
AICPA Conference Recap - Global Accounting Matters
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Commissioner Aguilar explained that obstacles to effective oversight and enforcement have arisen as the PCAOB has been prevented from inspecting the audit work of accounting firms in certain parts of the world, including certain European countries and China. In recent years, China-based companies have attracted the attention of regulators for a number of reasons, including the use of unusual tactics to gain access to the US capital markets, such as "reverse mergers" or "back-door initial public offerings."

Transcript of AICPA Conference Recap - Global Accounting Matters

  • 1. January 2013MHMMessengerTMM AY E R H O F F M A N M C C A N N P. C . A N I N D E P E N D E N T C PA F I R MA publication of the Professional Standards GroupFrom the AICPAs Annual SEC/PCAOB Current Events Conference:Global Accounting MattersChallenge: What are the most effective ways tofraud against US investors. The firms argue thatadapt financial reporting to global complexities, they are prohibited from providing the work papersincluding use of non-US auditors and fund-raising by Chinese law. Ultimately, the SEC may need toneeds of emerging companies?decide if the companies audited by these firmsshould be allowed to trade in the US securitiesCommissioner Aguilar explained that obstacles tomarkets. A negative answer to this question couldeffective oversight and enforcement have arisen ashave serious consequences for other issuers,the PCAOB has been prevented from inspecting theincluding US public companies with operations oraudit work of accounting firms in certain parts ofaffiliates in China.the world, including certain European countries andChina. In recent years, China-based companies have b.PCAOB Chairman James Doty reported that theattracted the attention of regulators for a number of Board is continuing to develop its Global Networkreasons, including the use of unusual tactics to gain Firm Inspection Program for accounting firms,access to the US capital markets, such as reverseand it is adapting its standard-setting process tomergers or back-door initial public offerings. the new legislative and regulatory requirementsfor audits of companies that qualify as emergingWhat to expect: Several regulators commented on growth companies under the JOBS Act.initiatives underway in these areas. c.PCAOB Chief Auditor Martin Baumann noted that a.Howard Scheck, Chief Accountant for the SECs the JOBS Act creates a new class of issuers, andDivision of Enforcement, noted that the SEC had it could result in the establishment of another setfiled several administrative proceedings and oneof auditing standards in the US, since the Act saysenforcement proceeding against China-basedthat PCAOBs standards will not apply to emergingaccounting firms for refusal to produce audit workgrowth companies unless the SEC determinespapers. The administrative actions follow inquiries that the standards are both in the public interestregarding reports of accounting errors by China-and promote efficiency, competition, and capitalbased issuers and the enforcement proceedingformation.is part of an investigation for potential accounting d.Director of SECs Division of Corporation FinanceMeredith Cross mentioned several areas of rule-making that relate to cross-border oversight andcapital formation by growing companies.our roots run deep TM 2 0 1 3 M AY E R H O F F M A N M C C A N N P. C . 877-887-1090 www.mhm-pc.com All rights reserved.

2. MHMMessenger The disclosures about conflict minerals frome.Howard Scheck, Chief Accountant for the SECs South Africa and payments to governments byDivision of Enforcement, reminded auditors that resource extraction issuers are controversial. the Division of Enforcement is continuing to The SEC recently issued final rules on both, and pursue potential violations of Section 10A of the the Division of Corporation Finance expects to Exchange Act. Section 10A requires auditors to issue more guidance soon in response to thehave policies and procedures regarding detection many questions about the requirements. of illegal acts, and it requires auditor reporting tothe Commission under certain circumstances. Additional releases are expected soon on more parts of the JOBS Act, including aMr. Scheck noted that there may be an recommendation on general solicitations andexpectation gap reflected in a recent study that proposal on crowdfunding.shows boards and audit committees are takingcomfort from their companys audit report that Guidance is also expected in the near future onthere are no violations of the Foreign Corrupt the Notice that must be filed with the SEC under Practices Act (FCPA). In practice, though, the the Iran Threat Reduction and Syria HumanSECs records show that reports of violations Rights Act of 2012. The Act requires quarterly generally do not come from the auditors. disclosures by companies about their (or their affiliates) engagement in certain businessMr. Scheck added that the Division of Enforcement activities relating to Iran. This requirementtalked to major accounting firms recently about takes effect for periodic reports required to be the steps they are taking and their findings with filed after February 6, 2013.regard to corporate compliance programs. Oneimportant caveat for companies: compliance Two longer-term projects of interest to theprograms should involve accountants, not just Division of Corporation Finance are: (a) attorneys, because of the books-and-records evaluating whether the rules for foreign provision of FCPA. The SEC and DOJ recently private issuers should be adjusted to be morepublished a resource guide on the Foreign Corrupt like the requirements for domestic issuers.Practices Act that is described in the appendix to This rule-making would reflect the changingthis Messenger. demographics of the population of non-US issuers and the fact that it is more likely now than in the past that some issuers may lack home-country disclosure rules to rely on; and (b) evaluating the potential for expanding some offering reforms, such as making file and go available to mid-sized companies.The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please contact your MHM service provider to further discuss the impact on your financial statements. 2 2 0 1 3 M AY E R H O F F M A N M C C A N N P. C . 877-887-1090 www.mhm-pc.com All rights reserved.