A Congressional hearing
set for this Wednesday, March 28, examining pending proposals and emerging issues in accounting and financial reporting, is expected to address, among other things, the PCAOBs' current consideration of whether to propose a requirement for mandatory audit firm rotation. The hearing is being convened by the House Financial Services Committee
, Subcommittee on Capital Markets and Government Sponsored Enterprises.
FASB, SEC, GASB, PCAOB To Testify
Panelists at the hearing represent a virtual who's who of accounting and auditing standard-setting, including FASB Chairman Leslie Seidman, GASB Chairman Robert Attmore, SEC Chief Accountant Jim Kroeker, and PCAOB Chairman Jim Doty.
FEI CCR Vice Chairman, Others To Testify
The second panel at the hearing will include Gary R. Kabureck, VP and Chief Accounting Officer of Xerox Corporation, who serves as Vice Chairman of FEI's Committee on Corporate Reporting, Prof. Joe Carcello of the Univ. of Tennessee, who has been one of the lead authors of COSO's fraud studies, Barry Melancon, President and CEO of the AICPA, and Tom Quaadman, VP of the Center for Capital Market Competitiveness of the U.S. Chamber of Commerce.
Carcello and Kabureck also currently serve on the PCAOB's Standing Advisory Group.
Draft Bill Would Prohibit PCAOB From Requiring Mandatory Auditor Rotation
According to a draft bill authored by Rep. Mike Fitzpatrick (R-PA), posted in connection with the hearing, the draft bill would: "amend the Sarbanes-Oxley Act of 2002 to prohibit the Public Company Accounting Oversight Board from requiring public companies to use specific auditors or require the use of different auditors on a rotating basis."
The PCAOB conducted two days of public hearings last week on its Concept Release soliciting public comment on various potential ways to enhance auditor independence, objectivity and skepticism; see our earlier post Heard Round the PCAOB Roundtable.
Promoting Transparency ... and Reducing Complexity
My two cents (please see Disclaimer posted on the right side of this blog): With ahearing that includes 'pending proposals and emerging issues' in its title, I would assume the status of the SEC's consideration of the use of IFRS in the US, and the status of FASB's convergence projects with the IASB, will come up.
It is also interesting that the PCAOB posted an updated Standard-Setting Agenda (including milestones achieved) earlier today, and FASB announced last week the addition of a project on Repos.
Personally, I wonder if some questions or comments may be raised in connection with promoting transparency and reducing complexity of financial reporting, along the lines of some earlier draft legislation (off the top of my head the legilsation passed the House a number of years ago but I don't recall if it passed the Senate and was voted into/incorporated into law; see our 9/9/09 post on what was then-called the Promoting Transparency In Financial Reporting Act ). That draft legislation would have required annual testimony by the SEC, FASB and PCAOB on efforts to increase transparency and reduce complexity of financial reporting.
In fact, this week's hearing takes place almost 6 years to the date of the initial hearing on "Fostering Accuracy and Transparency in Financial Reporting on 3/29/06 . Since that time, various recommendations were made by advisory committees, including the SEC Advisory Committee on Improving Financial Reporting (CIFIR) (aka 'the Pozen Committee' for committee chairman, Bob Pozen), and by the U.S. Treasury Department's Advisory Committee on the Auditing Profession (ACAP), co-chaired by former SEC Chairman Arthur Levitt Jr., and former SEC Chief Accountant Don Nicolaisen. (On Day Two of last week's PCAOB hearings on its auditor independence Concept Release, PCAOB Chairman Jim Doty introduced the panel including Pozen, Nicolaisen and former SEC General Counsel David Becker as being among the SEC's and PCAOB's 'rock stars' - an apt description, we thought, given a certain related music video.)
The SEC, FASB and PCAOB have implemented some of the significant recommendations of those advisory groups (CIFIR and ACAP), and have added projects to study, and/or solicited public comment on other recommendations (e.g. the SEC's final rule on XBRL and certain other rulemaking, FASB's project on the Disclosure Framework, and a variety of PCAOB projects including their proposed rule on engagement partner signature) .
In an ever-changing world, combined with the additive effect of new rulemaking, the quest for continually enhancing transparency and reducing the complexity of financial reporting continues.