Momentum is building for the creation of a new body of experts specifically charged with figuring out a way to reduce the complexity of financial reporting.
Conrad Hewitt, chief accountant of the Securities and Exchange Commission, said in a recent speech to an accounting audience that he wants to work with various rulemaking and professional organizations to launch a project that would seek to eliminate unnecessary complexity in financial reporting. He named the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, the American Institute of Certified Public Accountants, and Financial Executives International as prospective contributors to such a project.
“The more I am involved with our accounting standards, the more I am convinced that we need to eliminate standards that are overly complex, difficult for issuers to implement without extensive outside assistance, and that are difficult for the average investor to understand,” Hewitt said. “I could see an independent body headed by a prominent person to begin this project.”
Hewitt said the study should focus not only on how to reduce complexity, but on how accounting standards grew so complicated to begin with and how to address whatever those issues might be.
Cangemi
Robert Herz, chairman of the FASB, has openly bemoaned complexity and remarked he would welcome the creation of a task force of some kind to tackle the issue. FEI President Michael Cangemi fired off a letter to Hewitt following his recent remarks offering to help get the ball rolling.
“I believe that such a project on complexity that takes into account the perspectives of the auditors, preparers and regulators can result in practical recommendations that will support and strengthen our capital markets, and maintain shareholder confidence,” Cangemi wrote to Hewitt.
AICPA To Auditors: Mind Your Audit-Report Dates
An AICPA task force has issued a practice alert giving guidance on how auditors of non-public companies should date their audit reports.
Glynn
The alert says auditors should date their audit reports based not on when they’ve completed their field work, but based on when they have obtained sufficient evidence to support their audit opinion. That’s the benchmark established in Statement of Auditing Standards No. 103, says Mike Glynn, technical manager for audit and attest standards at the AICPA.
“Prior to the issuance of SAS 103, auditors dated their report as of the date of the completion of fieldwork—even if additional audit work was performed after they left the client's premises,” Glynn says. With the new standard, “auditors have noted that the change has had a considerable effect on their consideration of events subsequent to the balance sheet date, as the auditor’s responsibility has always extended to the date of the report—which, of course, is now later.”
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