SEC Considers Tougher Audit Committee Disclosures

The Securities and Exchange Commission has voted Wednesday to publish a concept release asking for public comments about the current audit committee disclosure requirements, focusing particularly on toughening the committee’s oversight of independent auditors. 

The SEC said it is interested in receiving information about the audit committee and auditor relationship and whether improvements can be made to enhance the information provided to investors about the audit committee’s responsibilities and activities. 

“Effective audit committee oversight is essential to investor protection and the functioning of our capital markets,” said SEC Chair Mary Jo White in a statement. “The way audit committees exercise their oversight of independent auditors has evolved and it is important to evaluate whether investors have the information they need to make informed decisions.”  

In addition to seeking views about audit committee disclosures, the concept release invites the public to weigh in on whether the SEC’s disclosure requirements should be beefed up to provide more insight into the information the audit committee used and the factors it considered in overseeing the independent auditor. This includes considerations related to the process for appointing or retaining the auditor and the qualifications of the auditor and certain members of the engagement team, among others.

Among the questions the SEC wants to know more about are whether the disclosures should include a description of the nature of the audit committee’s involvement in approving the auditor’s compensation, including how compensation is determined and evaluated? Should the disclosures include the criteria or elements the audit committee considered? Should the audit committee provide additional disclosure about the nature and extent of non-audit services and its evaluation on how such services relate to its assessment of independence and objectivity?

The public comment period will remain open for 60 days following publication of the concept release in the Federal Register.   

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