Washington, D.C. -- The Public Company Accounting Oversight Board voted in mid-October to adopt two attestation standards pertaining to audits of brokers and dealers, along with an auditing standard for broker-dealer audits.

The new standards are part of an effort to protect customer funds by enhancing the quality of compliance information provided to the Securities and Exchange Commission and used in its regulatory oversight of broker-dealers. They come in response to recent scandals at a number of financial services firms.

The auditing standard adopted by the PCAOB is applicable when auditors are engaged to perform audit procedures and report on supplemental information that broker-dealers and others file with the SEC. In addition, the PCAOB adopted related amendments to other PCAOB standards. The Dodd-Frank Act of 2010 included provisions enabling the PCAOB to inspect audits of certain types of broker-dealers that hold customer funds in the wake of the Madoff scandal.

The two attestation standards cover the auditor's examination of compliance reports and the auditor's review of exemption reports. The requirements for broker-dealers to prepare compliance or exemption reports, and for PCAOB-registered auditors to examine or review such reports, are new requirements included in the SEC's recent amendments to Exchange Act Rule 17a-5. Consistent with the requirements of Rule 17a-5, the attestation standards establish requirements for auditors examining certain statements in broker-dealer compliance reports and reviewing statements in broker-dealer exemption reports. The supplemental information standard establishes the auditor's responsibilities when engaged to perform audit procedures and report on supplemental information that accompanies the audited financial statements. Supplemental information includes the supporting schedules that broker-dealers are required to file with the SEC. AS No. 17 and related amendments, if approved by the SEC, will be effective for reports on supplemental information that accompanies financial statements for fiscal years ending on or after June 1, 2014. This coincides with annual reporting requirements for broker-dealers under the SEC amendments to Rule 17a-5.



Norwalk, Conn. -- The Private Company Council voted at a meeting in early October to finalize two alternatives within U.S. GAAP, for accounting for interest rate swaps, and for accounting for goodwill in a business combination for private companies. The two alternatives have gone to the Financial Accounting Standards Board for further discussion and possible endorsement.

The proposed GAAP alternative for accounting for interest rate swaps would give private companies other than financial institutions the option to use a simplified hedge accounting approach to account for certain types of interest rate swaps that are entered into for the purpose of economically converting variable rate interest payments to fixed-rate payments.

The alternative would also extend the exemption from certain fair value disclosures to private companies for which such swaps are their only derivatives.

The second proposed alternative, for accounting for goodwill after a business combination, would permit a private company to subsequently amortize goodwill over a period of 10 years, or less under certain circumstances, and to apply a simplified impairment model to goodwill.

The proposed GAAP alternative on interest rate swaps represents a change from the original proposal, which would have enabled private companies to use both a simplified hedge accounting approach and a combined instruments approach to account for certain types of interest rate swaps.

Also discussed at the meeting was the FASB exposure draft on PCC Issue No. 13- 01A, Accounting for Identifiable Intangible Assets in a Business Combination, which modifies the requirement for private companies to separately recognize fewer intangible assets acquired in a business combination. The PCC directed the FASB staff to conduct more research for further discussion at a future meeting.

The Private Company Council and FASB also discussed and provided input on FASB's projects on leases, development-stage entities, and the definition of a non-public entity.

The next PCC meeting will be held on Tuesday, Nov. 12, 2013.



London -- The United Kingdom's Competition Commission has published its final report on the audit market, proposing that publicly traded companies put their audit contracts out for bid at least every 10 years.

The aim of the CC's proposal is to open up the U.K. audit market to more competition beyond the Big Four firms and ensure that audits better serve the needs of shareholders in the future. In a summary of its final report on the supply of statutory audit services to large companies in the U.K., the commission found that competition is restricted in the audit market due to factors that inhibit companies from switching auditors and by the incentives that auditors have to focus on satisfying management, rather than shareholder, needs. The final report follows a provisional finding that was published in February, as well as the provisional decision on remedies in July. In the July report, the commission recommended a retendering period of every five years. Under the proposals, no company would be able to delay beyond 10 years. If companies choose not to go out to tender this frequently, a company's audit committee would be required to report in which financial year it plans to put the audit engagement out to tender. 



New York City -- The Sustainability Accounting Standards Board has created a corporate pilot program to guide companies on how to use the board's standards to report material sustainability issues in their SEC filings. The program, which is a Clinton Global Intitiative "Commitment to Action," is open to 10 publicly listed U.S. companies in the health care and financial sectors. The pilot companies will be chosen by the first quarter of 2014; the program will help them disclose environmental, social and governance issues in their annual SEC filings. Over the next three years, SASB and its lead strategic partner, information provider Bloomberg, plan to run pilot programs in a total of 10 sectors. SASB tapped Douglas Park to lead the pilot program as its new director of education. Park is a recognized authority on corporate governance and an award-winning business professor.

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