If the Securities and Exchange Commission decides in 2011 to require public companies to adopt International Financial Reporting Standards, they can expect at least four years to get ready for the requirement, said Mary Schapiro, Chairman of the SEC, in an address to an accounting conference today.

Schapiro said the SEC is still committed to making a decision at some point in 2011 – not necessarily by June as rumored, she said – about whether it will require U.S. public companies to cut over to IFRS to make U.S. financial statements more consistent with reports issued around the world. While comments on the SEC's work to date doesn't reflect strong support for a U.S. switch to international rules, they do reflect a common call for plenty of time to adopt IFRS if it is eventually required, she said.

Comments reflected “a lot of unanimity around, if we go in this direction, allowing sufficient time for companies to adjust,” said Schapiro in a question-and-answer session following her keynote address to the American Institute of Certified Public Accountants' national conference on accounting and auditing issues for public companies. “It's likely to be a minimum of four years,” but that's still a point for the SEC to decide, she said, assuming it decides to incorporate IFRS into U.S. capital markets.

Schapiro said the enormous workload thrust on the SEC as a result of the Dodd-Frank bill will not impact any of the SEC's accounting and auditing initiatives, she said. Only a small amount of the work load – including more than 100 new rules to write, more than 20 studies to conduct, and a number of new offices to create within the agency – falls under the SEC's Office of the Chief Accountant, she said. As such, the Dodd-Frank efforts won't interrupt the OCA's work on the IFRS work plan.

Schapiro took the opportunity to remind preparers and auditors of financial statements that they have a key role to play in helping skittish investors regain confidence in capital markets. The ability of an enforcement agency to help investors get more confident is limited. “Bringing actions after the fact is no substitute for full and honest disclosure at the outset, she said. “Enforcement actions are cold comfort for investors who lost their savings after relying on misrepresentations or half-truths.”

The SEC chairman wondered aloud whether front-line preparers and auditors could have done more to prevent some of the scandals that have rocked capital markets in recent years. “In too many investigations, we have been struck by the magnitude of the misrepresentations we discovered,” she said. Even when high-profile players are charged with misdeeds, “they can also raise troubling questions about the many others involved in preparing and auditing the filings and report. We wonder if questions could have been asked early on by preparers and auditors, or if warning flags were simply ignored.”

She implored auditors and preparers to ask themselves some critical questions that could prevent problems from blowing up. Is the information accurate? Does it represent wishful thinking or a true portrait of actual results? Am I missing red flags? Should there be more disclosure? “And, if these questions do not yield the answers you need, I urge you to have the courage to challenge those answers — a willingness to take your judgments about the quality of disclosures to the highest levels of management and to the audit committee,” she said.