Financial Reporting and Regulatory Update

Third Quarter 2021

From the PCAOB

Final inspection and investigations rule

On Sept. 22, 2021, the PCAOB adopted a final rule related to its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA). The HFCAA requires the board to determine whether it is unable to inspect or investigate registered public accounting firms located in a foreign jurisdiction and communicate the determination to the SEC. The SEC, in certain circumstances under the law, will be required to take further action related to registrants with audit opinions rendered in those foreign jurisdictions.

The final rule is subject to SEC approval before becoming effective.

Board members intentions to resign

On Aug. 23, 2021, in a joint public statement, PCAOB board members Rebekah Goshorn Jurata and Megan Zietsman announced their intention to resign from the PCAOB on the earlier of Oct. 1, 2021, or the appointment of new board members. Both expressed gratitude to the staff. They said it was an honor to serve and that they would remain committed to the mission and work of the PCAOB until they depart.

Annual broker-dealer inspection report

On Aug. 19, 2021, the PCAOB released its annual report on the 2020 interim inspections of broker-dealer auditors. The report includes observations from inspections during 2020, guidance about and examples of effective procedures, and information about the inspection approach. According to the report, the percentage of firms with audit and attestation engagement deficiencies dropped 14% from 2019 but remained high, and continued improvement is needed.

The PCAOB also notes that this report should help broker-dealer owners and audit committees or equivalents as they oversee the work of their auditors and engage on financial reporting. With the report, the PCAOB released “Supplementary Information Related to Audits of Brokers and Dealers,” which provides comparative data about selected firms and engagements and the results of PCAOB inspections over multiyear periods.