- SEC Publishes Concept Release on Audit Committee Disclosures
- August 3, 2015 | Author: J. Andrew Gipson
- Law Firm: Jones Walker LLP - Jackson Office
On July 1, the United States Securities and Exchange Commission ("SEC") published a Concept Release regarding potential revisions to audit committee disclosures required to be included by listed companies in annual proxy or information statements.
The focus of the Concept Release is on the audit committee's reporting of its responsibilities and oversight of the independent auditor. The current disclosures required of audit committees are set out under Item 407 of Regulation S-K, and must be included in proxy or information statements for an annual meeting at which directors are elected or selected by consent. In its Concept Release, the SEC expressed concern that while the current reporting requirements "provide information about the role of the audit committee with respect to its oversight of the auditor, the disclosures do not describe how the audit committee executes its responsibilities." The SEC has taken note that a number of audit committees voluntarily provide more information than required under current rules, raising a question of "whether there may be market demand for such information."
The Concept Release includes discussion and request for comment on issues including: additional disclosure regarding communications between the audit committee and auditor, the frequency with which the audit committee met with the auditor, information about the auditor's internal quality-control review, and whether and how the audit committee may assess, promote, and reinforce the auditor's objectivity and professional skepticism. Additionally, the SEC is requesting comment on potential additional disclosures regarding the committee's process and rationale for assessment, selection or retention of the auditor, including whether a request for proposals was issued and, if so, the factors considered in selecting the auditor. Other proposed disclosures include background on the qualifications and independence of the auditor, such as the name and selection of the audit engagement partner, length of time the auditor has audited the company, and any other firms involved in the audit.
Other miscellaneous requests for comment not discussed above were included in the SEC's proposed rules. Comments are due on or before September 8, 2015.