Volume 14, No. 14

 

What Keeps The SEC Busy - 2006  The American Institute of Certified Public Accountants held its annual Current SEC & PCAOB Developments Conference in Washington, DC a few weeks ago, featuring speakers from the SEC, the FASB and the PCAOB. The conference is a major event for auditors of public companies: it's a chance for many of them to hear first-hand from the SEC's staff about nettlesome reporting issues. Auditors want to know these things: forewarned is forearmed when dealing with clients and the SEC, as well. Why burn up valuable audit field time on issues that the SEC has already addressed? Plus, the knowledge provides an upper hand in dealing with sketchy clients: an auditor is perhaps able to trump an aggressive CFO's treatment of a transaction with the hot-issue heads-ups gleaned from this conference. Efficient auditors want the SEC to be their eyes and ears, letting them pick out the accounting issues they might face at audit crunch time. It's worth it to them to spend three days at this conference. As for investors: because the SEC sees the financial statements in the review process well before investors read the annual reports, it makes sense for them to listen to what the SEC has to say. The comments of the SEC staff don't portend disasters. Rather, their remarks indicate there are firms out there that either misunderstand or intentionally misapply generally accepted accounting principles - leading to changes in accounting or restatements of past reporting. Those consequences are not always well-received by markets, and lead to confusion among market participants. For that reason alone, investors ought to be interested in the comments of the SEC staff. Here's what interested the SEC in 2005.

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