SEC Acts Promptly on Audit Proposal

Article excerpt

SOON AFTER THE NOVEMBER 29 closing of the public comment period for the Securities & Exchange Commissions audit committee proposal, SEC Chairman Arthur Levitt, Jr., finalized the rule. That was on December 15, five days after written comments from the Financial Executives Institute (FET) reached the SEC. The two organizations had been talking for the past month. The written comments were requested by the SEC in order to have a record of what was said during the oral discussions, according to Bob Burns, am top staffer in the SEC office of the chief accountant.

Although the SEC changed some aspects of the proposal as a result of FEI's concerns, it didn't budge on one area. The final rule will require independent auditors to review (but not audit) quarterly statements, something the FEI opposed. The FEI's December 10 letter to the SEC said: "We are not convinced that the limited review procedures that are required to be performed under SAS 71 will provide major incremental benefit in this area, but we understand the desire to improve financial reporting over a broad range of all types of companies."

The SEC did change the policy requiring the audit committee to state in a 10-K or 10-KSB whether it reviewed and discussed certain matters with management and auditors and whether it recommended to the Board that the audited financial statements be included in those documents. Initially, the SEC wanted a statement from the audit committee that it hadn't come upon any material misstatements. FEI and others didn't like that "negative attestation," so in the final version of the rule the SEC simply requires the audit committee to say that it checked with the auditors and management and agrees that the financial statement should be filed with the 10-K.

SEC on Revenue Recognition

Another indication of Chairman Levitt's preoccupation with financial reporting is the recent rush of Staff Accounting Bulletins. Hot on the heels of SAB 100, discussed last month, the SEC has released SAB 101. …