Attention public companies: The Public Company Accounting Oversight Board, affectionately known as “peek-a-boo,” is watching you ever so closely…and wants to see even more of you.
That was the underlying message delivered by PCAOB Board member Greg Jonas as he addressed the recent second annual University of California-Irvine’s Audit Committee Summit, sponsored in part by PondelWilkinson.
“Regulators’ role is to be sure that investors hear the good, the bad and the ugly,” Jonas said. “Our challenge is to be useful and not just get in the way.”
Jonas spoke about the PCAOB’s “concept” issued in July, seeking public comment on 28 potential audit quality indicators to help identify insights into how high quality audits are achieved.
Jim Schnurr, Chief Accountant for the Securities and Exchange Commission, who is responsible for establishing and enforcing accounting and auditing policy and served as the event’s keynote speaker, interpreted the PCAOB’s project as a determining factor of whether additional public company disclosures should be made, particularly regarding greater oversight of management.
“The audit committee is in an excellent position to gain insight into management controls,” said Schnurr. “Avoidance of boilerplate reporting and minimizing the risk of litigation should be high on the directors’ agendas.”
Schnurr offered additional tips for audit committee members that should resonate with management:
- Focus on effective disclosure
- Increase the use of hyperlinks in communications
- Periodically re-evaluate the relevance of disclosure items
- Use solid judgment about what is not being disclosed
- Be certain that audit committee members have the bandwidth to properly fill their roles
Two expert panel discussions followed Schnurr’s and Jonas’s addresses. Panelist Bala Iyer, audit committee chair at QLogic, offered a number of suggestions, focusing heavily on three: asking tough questions; trusting management; and taking the time to thoroughly understand the business.
The Sarbanes-Oxley Act of 2002, which created the PCAOB, requires that auditors of U.S. public companies be subject to external, independent oversight for the first time in history. The Board has no authority over public companies, but its work can have deep implications. Here’s looking atchya.
— Roger Pondel, email@example.com