As part of the Center for Audit Quality’s (CAQ) ongoing effort to keep members and stakeholders informed on significant public policy and accounting matters, we are pleased to offer the Public Policy and Technical Alert (PPTA). Each month, the PPTA highlights and examines the regulatory, standard-setting, legislative, and broader financial reporting developments impacting the public company audit profession. Please note that the PPTA is intended as general information and should not be relied upon as being definitive or all-inclusive. The CAQ encourages member firms to refer to the rules, standards, guidance, and other resources in their entirety at the hyperlinks provided below. All entities should carefully evaluate which requirements apply to their respective organizations.
In This Issue
SEC Investor Advisory Committee Held December 10 Meeting
The SEC held its Investor Advisory Committee held a virtual public meeting on December 10, 2024. The committee hosted two panels:
- Examining the Use of Mandatory Arbitration Clauses by registered Investment Advisers; and
- Mainstreaming of Alternative Assets to Retail Investors
The committee also discussed a potential recommendation regarding the Protection of Investors in their Interactions with Finfluencers.
Remarks Before the 2024 AICPA & CIMA Conference on Current SEC and PCAOB Developments: Accounting Matters
The SEC posted the remarks that Paul Munter, Chief Accountant, delivered before the 2024 AICPA & CIMA Conference on Current SEC and PCAOB Developments.
SEC Modernizes the Submission of Certain Forms, Filings, and Materials Under the Securities Exchange Act of 1934
The SEC adopted amendments to require the electronic filing, submission, or posting of certain forms, filings, and other submissions that national securities exchanges, national securities associations, clearing agencies, broker-dealers, security-based swap dealers, and major security-based swap participants make with the Commission. The compliance dates for these amendments vary depending on the applicable form or rule but range from 60 days after the release is published in the Federal Register to on or after June 30, 2028.
SEC Approves 2025 PCAOB Budget and Accounting Support Fee
The SEC announced it voted to approve the 2025 budget of the PCAOB and the related annual accounting support fee. The 2025 PCAOB budget totals $399.7 million. The accounting support fee totals $374.9 million, of which $346.1 million will be assessed on public company issuers and $28.8 million will be assessed on registered broker-dealers.
SEC Adopts Rule Amendments to the Broker-Dealer Customer Protection Rule
The SEC adopted amendments to Rule 15c3-3 (the customer protection rule) to require certain broker-dealers to increase the frequency with which they perform computations of the net cash they owe to customers and other broker-dealers from weekly to daily. The SEC also adopted amendments to Rule 15c3-3 and Rule 15c3-1 (the broker-dealer net capital rule) to permit certain broker-dealers that perform a daily customer reserve computation to decrease the required 3% “buffer” in the customer reserve bank account by reducing the customer-related receivables, or “aggregate debit items,” charge from 3% to 2% in the computation. The amendments will become effective 60 days after the date of publication of the adopting release in the Federal Register.
A New Edition of the PCAOB’s Audit Focus Series Provides PCAOB Staff Insights for Auditors on Audit Committee Communications
The PCAOB announced a new edition of its Audit Focus series. This edition, Audit Focus: Audit Committee Communications, highlights key reminders for auditors from the PCAOB standards and staff guidance related to audit committee communications, provides the staff’s perspectives on common deficiencies in auditors’ work, and shares good practices that the staff has observed.
The PCAOB Has Posted a Staff Presentation Video Designed to Help Auditors Prepare for the Implementation of AS 2310, The Auditor’s Use of Confirmation
The PCAOB announced a new implementation resource for its standards and rules, Staff Presentation: Helping Auditors Prepare for Implementation of AS 2310, The Auditor’s Use of Confirmation.
A New PCAOB Staff Report on Audit Firm Culture Offers Considerations for Firms Looking to Improve Audit Quality
The PCAOB posted a new report, Spotlight: Insights on Culture and Audit Quality. This Spotlight provides a view into inspection observations on audit firm culture and key insights from an initiative launched by the PCAOB in September 2023 focused on culture at audit firms. The report is based on an in-depth PCAOB staff review of culture at audit firms, including more than 150 interviews with partners at the largest U.S. audit firms.
PCAOB Staff Report Outlines 2025 Inspection Priorities with Focus on Driving Improvements in Audit Quality
PCAOB inspectors released a staff report that outlined their priorities for inspections in 2025. The report highlights risks and other considerations the staff believes auditors should consider when planning and performing their current and upcoming audits, as well as sectors and industries that PCAOB inspection staff will prioritize. The report also provides a set of suggested questions that audit committees may consider as they exercise their oversight role.
2025 FASB Taxonomies Now Available
The FASB announced the availability of the 2025 GAAP Financial Reporting Taxonomy (GRT), the 2025 SEC Reporting Taxonomy (SRT), and the 2025 GAAP Employee Benefit Plan Taxonomy (EBPT). The FASB also announced the availability of the 2025 DQC Rules Taxonomy (DQCRT) and 2025 GAAP Meta Model Relationships Taxonomy (MMT), which together with the GRT, SRT, and the EBPT are collectively referred to as the “FASB Taxonomies.” The 2025 GRT, 2025 SRT, and 2025 EBPT are expected to be accepted as final by the SEC in early 2025.
FASB Seeks Public Comment on Proposal to Improve Financial Accounting for and Disclosure of Environmental Credits and Environmental Credit Obligations
The FASB published a proposed Accounting Standards Update (ASU) intended to improve the financial accounting for and disclosure of financial activities related to environmental credits and environmental credit obligations. The changes are expected to provide investors with additional decision-useful information by improving the (1) understandability of financial accounting and reporting information about environmental credits and environmental credit obligations and (2) comparability of that information by reducing diversity in practice. Stakeholders are encouraged to review and provide input on the proposed ASU by April 15, 2025.
FASB Stakeholders Invited to Share Their Views on Intangibles
The FASB published an Invitation to Comment (ITC) that gives stakeholders the opportunity to provide feedback on whether it should pursue a project on intangibles. Stakeholders are asked to review and provide comments on the ITC by May 30, 2025.
Financial Accounting Standards Advisory Council (FASAC) Meeting Recap: December 5, 2024
The FASB posted a recap of the FASAC quarterly meeting held on Thursday, December 5, 2024. The FASB chair provided highlights on FASB activities, and staff members from the SEC and PCAOB and the AICPA Auditing Standards Board chair commented on current issues and activities. The FASB staff provided an update on the Emerging Issues Task Force, including its reconstituted operating procedures and process. Council members discussed and provided input on the Invitation to Comment, Financial Key Performance Indicators for Business Entities. The FASB staff provided an overview of the FASB’s Post-Implementation Review process.
Business Experimentation with Gen AI Grows but Full Implementation Remains Rare, AICPA & Chartered Institute of Management Accountants (CIMA) Survey Finds
AICPA & CIMA announced new findings from their fourth-quarter Economic Outlook Survey regarding generative artificial intelligence (Gen AI). Business executives are more engaged in investigating potential uses of Gen AI tools for their organizations than they were a year ago. But actual implementation of the transformative technology in key operations remains rare.
Revised Ethics Guidance: Recruiting Services
The AICPA announced the Professional Ethics Executive Committee (PPEC) has released revised authoritative guidance for AICPA members to ensure independence, protect the public, and align with international standards. The guidance includes certain new prohibitions when a member is performing recruiting services for a key position for an attest client..
Simultaneous Employment or Association with an Attest Client
The AICPA announced its PEEC seeks comment on an exposure draft related to simultaneous employment. PEEC asks for input on several questions. Comments are due March 16, 2025.
Final Version of New AICPA Peer Review Standards Update Now Available
AICPA announced that a new standards update that aligns the peer review process with quality management requirements is now live on the AICPA’s website. The AICPA Peer Review Board voted in November to approve Peer Review Standards Update (PRSU) No. 2, which aligns peer review standards with new quality management standards that go into effect late next year. The update also clarifies and improves existing technical guidance. Accounting firms have until December 15, 2025, to adopt a quality management system in accordance with AICPA standards. For firms subject to peer review, the quality management related provisions of PRSU No. 2 are effective for peer review years ending on or after December 31, 2025.
Sustainability Standards Approval and Other Key Milestones Achieved at International Ethics Standards Board for Accountants’ (IESBA) December Meeting
The IESBA at its December 2024 meeting approved two sets of standards that will underpin public trust in sustainability reporting and assurance:
- The International Ethics Standards for Sustainability Assurance (IESSA) and related revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code), setting a global benchmark for ethical behavior and independence in sustainability reporting and assurance.
- Revisions to the Code on the Using the Work of an External Expert, establishing an ethical framework for evaluating the competence, capabilities and objectivity of external experts used by professional accountants and sustainability assurance practitioners.
The Board also approved a project plan to develop a new standard on accounting firm culture and governance, focusing, among other matters, on ethical leadership and accountability within accounting firms.
International Accounting Standards Board (IASB) Completes Technical Work on Management Commentary
The IASB completed its technical decision making on the revised International Financial Reporting Standards (IFRS) Practice Statement 1 Management Commentary. The IASB will now move into the drafting phase, with the updated Practice Statement expected to be published in the first half of 2025. The IASB intends for the revised Practice Statement to provide a comprehensive resource for regulators and companies to support improvement and greater global alignment in management commentary and similar reports.
New Webcast Series: Connectivity Between the Financial Statements and Sustainability-Related Financial Disclosures
The IFRS Foundation announced a new webcast series, “Connecting IFRS Accounting and IFRS Sustainability” which discusses how IFRS Accounting Standards and IFRS Sustainability Disclosure Standards complement each other.
International Forum of Independent Audit Regulators (IFIAR) Statement on Private Equity Investment in Audit Firms
The IFIAR published its Statement on Private Equity Investment in Audit Firms.
December 2024 IASB Update and Podcast Now Available
The IFRS Foundation announced that the IASB Update, summarizing the December 2024 IASB meeting, is now available. The latest episode of the IASB podcast is also available.
IASB Updates IFRS Accounting Standards for Nature-Dependent Electricity Contracts
The IASB issued targeted amendments to help companies better report the financial effects of nature-dependent electricity contracts, which are often structured as power purchase agreements.
International Organization of Securities Commissions’ (IOSCO) Growth and Emerging Markets Committee (GEMC) Launches a Dedicated Network to Support its Members in the Adoption or Other Use of ISSB Standards in Their Local Jurisdictions
The IOSCO announced the launch of a dedicated network to support the adoption and other use of IFRS Sustainability Disclosure Standards (ISSB Standards) with the support of the International Sustainability Standards Board (ISSB). The Network will start with a group of 32 IOSCO members of its GEMC, representing 31 jurisdictions.
Financial Reporting Council (FRC) developments:
- Published its annual Audit Market and Competition Update for 2024
- Published its annual inspection findings for Tier 2 and Tier 3 audit firms
- Published a draft three-year strategy for 2025-28 reaffirming its commitment to serving the public interest and supporting U.K. economic growth.
- Published the U.K. Sustainability Disclosure Technical Advisory Committee’s (TAC) final recommendations to the Secretary of State for Business and Trade, recommending endorsement of the first two IFRS Sustainability Disclosure Standards for use in the United Kingdom.
- Issued Financial Reporting Exposure Draft (FRED) 86 “Draft amendments to FRS 101 Reduced Disclosure Framework”
ESG Reporting: A Primer on Key Regulatory Reporting Requirements for U.S. Based Entities
The CAQ posted ESG Reporting: A Primer on Key Regulatory Reporting Requirements for U.S. Based Entities. This publication offers insight into:
- Key regulatory ESG reporting requirements and standards likely to impact U.S. entities
- Ongoing developments that should be monitored
- Practical implementation considerations
Capital Markets Pulse | December 2024
The CAQ released another edition of Capital Markets Pulse, a monthly newsletter from the Center for Audit Quality that brings you insights, resources, and tools on the latest issues impacting the capital markets. Some of the topics discussed were:
- Implications of recent Supreme Court decisions with Mike Scanlon
- Highlights from the Annual AICPA & CIMA Conference
- PCAOB Approves Rules on Firm Engagements Metrics and Firm Reporting; Postpones NOCLAR
- Trump Nominates Paul Atkins for SEC Chair Following Chair Gensler’s Departure Announcement
Comment Letters to SEC on PCAOB’s Firm Reporting and Firm and Engagement Metrics Rules
The CAQ submitted comment letters to the SEC on the PCAOB’s Firm Reporting and Firm and Engagement Metrics rules that were approved by the PCAOB in December. In these letters, the CAQ communicated comments regarding the SEC’s obligation to conduct economic analysis. In addition, the letters expressed concerns regarding the Board’s lack of sufficient due process and reiterated numerous overarching concerns previously and continuously raised with the rules since they were first proposed, but were not adequately addressed in the final rules adopted by the Board.
Document for Discussion: Monitoring Inflation in Certain Countries
The CAQ posted a Document for Discussion: Monitoring Inflation in Certain Countries as of November 2024. Registrants are responsible for monitoring inflation in countries where they operate and there are fundamental accounting implications for companies operating in countries that are considered highly inflationary. The information in the discussion document may be helpful to management in applying US GAAP (ASC 830, Foreign Currency Matters), in conjunction with its internal controls over financial reporting to reach a conclusion on whether a country’s economy should be considered highly-inflationary.
The Center for Audit Quality is a nonpartisan public policy organization serving as the voice of U.S. public company auditors and matters related to audits of public companies. The CAQ promotes high quality performance by U.S. public company auditors; convenes capital market stakeholders to advance the discussion of critical issues affecting audit quality, U.S. public company reporting, and investor trust in the capital markets; and using independent research and analyses, champions policies and standards that bolster and support the effectiveness and responsiveness of U.S. public company auditors and audits to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs. For more information, visit www.thecaq.org.
The CAQ Public Policy and Technical Alert (PPTA) is intended as general information and should not be relied upon as being definitive or all-inclusive. As with all other CAQ resources, this is not authoritative and readers are urged to refer to relevant rules and standards. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The CAQ makes no representations, warranties, or guarantees about, and assumes no responsibility for, the content or application of the material contained herein and expressly disclaims all liability for any damages arising out of the use of, reference to, or reliance on such material. This publication does not represent an official position of the CAQ, its board, or its members.
Questions and comments about the Public Policy & Technical Alert can be addressed to Donnie Heinerichs, Manager, ESG Initiatives (dheinerichs@thecaq.org) or Annette Schumacher, Senior Director, Professional Practice (ashumacher@thecaq.org).