SEC/CORPORATE -

SEC Approves PCAOB Rule to Require Enhanced Audit Reports -

On October 23, the Securities and Exchange Commission approved new audit reporting standard, AS 3101, proposed by the Public Company Accounting Oversight Board (PCAOB), which requires auditors to provide new information in public company audit reports, with the goal of making such reports more informative for investors and other financial statement users. The adoption of the PCAOB rule represents the first significant change to the auditor’s report in several decades and will fundamentally change the auditors’ report from a writing that consists entirely of boilerplate (in the vast majority of cases at least), into a document that contains disclosure specific to the particular filer, as discussed in more detail below. In a public statement on October 23, SEC Commissioner Kara Stein said she expects the PCAOB rule to result in auditor’s reports that “provide investors with more meaningful information about the audit, including significant estimates and judgments, significant unusual transactions and other areas of risk at a company,” which will “add to the total mix of information available to investors when making voting and capital allocation decisions.”