Financial Reporting and Regulatory Update

Third Quarter 2022

From the CAQ

Analysis of Form 10-K climate-related disclosures

On Sept. 9, 2022, the CAQ released an S&P 500 10-K analysis summarizing results of its review of the June 2022 Form 10-Ks from S&P 500 companies to understand the disclosures regarding climate-related information, greenhouse gas (GHG) emissions, and net-zero and carbon-neutral commitments. The CAQ noted that 453 of the S&P 500 mentioned climate-related information in their 10-Ks, representing an 18% increase from 2020; however, only 104 companies mentioned GHG emissions in their disclosures. The analysis details the types of information included in the disclosures, where the disclosures are included, and where in the financial statements climate-related matters were mentioned. 

Audit Partner Pulse Survey

On July 6, 2022, the CAQ released its first “Audit Partner Pulse Survey,” a compilation of U.S. public company audit partner observations on a range of topics. The CAQ intends to publish it regularly. This first survey is based on responses from 700 audit partners from the eight governing board firms at the CAQ and is from data collected during May 2022. Topics include the overall outlook on the economy, business transformation, and quality of corporate disclosures. 

According to the survey results related to economic outlook, continued inflation and rising prices are expected, with 84% of audit partners responding that they are not optimistic about the economic outlook over the next 12 months. Respondents identified inflation, labor shortages, supply shortages and supply chain disruptions, and cybersecurity threats as the top economic risks facing companies. Talent is the most important corporate priority for 2022, according to 53% of respondents, and they identified increasing flexibility and compensation as the top two methods to attract and retain talent. 

Partners also said that more progress is needed in cybersecurity specifically related to managing risk, enhancing disclosures, and aligning cybersecurity with company goals; however, the results indicate that significant progress was made in communications on cybersecurity between management and the board. The surveyed audit partners also identified that climate change is both a short- and long-term priority for public companies, although they noted reporting challenges. Lastly, while cryptocurrency was not named as a priority for most industries, the financial services industry was identified as an early adopter of cryptocurrency and was more likely to be considering or preparing to accept crypto as a form of payment