Comparing Auditors’ and Users’ Materiality Judgments

By Marcus Doxey and Chez Sealy February 20, 2023 by renholding

Materiality is a ubiquitous concept in accounting and auditing. Accounting and disclosure rules, with few exceptions, are bounded by materiality, meaning that if a matter is immaterial, it is often exempted from the accounting rules. In respect to audits, the …

Financial Regulators Offer Update on Audit Quality in Emerging Markets

By Jay Clayton, Sagar Teotia and William D. Duhnke III November 25, 2020 by renholding

Over the past several years, the exposure of U.S. investors and our capital markets to companies with significant operations in emerging markets, including China, has increased.[1] This increased exposure carries with it a number of significant risks and challenges,

…

How Congress Got It Right on Audit Oversight

By James R. Doty February 24, 2020 by renholding

President Donald Trump’s proposed $4.8 trillion budget calls for folding the Public Company Accounting Oversight Board (PCAOB), America’s audit watchdog, into the Securities and Exchange Commission, the nation’s primary financial regulator. The stated goal is to eliminate duplicative regulations and …

Financial Regulators Warn Over Chinese Audit Quality Amid Coronavirus Outbreak

By Jay Clayton, Bill Hinman, Sagar Teotia and William D. Duhnke III February 20, 2020 by renholding

In November 2019, we met with senior representatives of the four largest U.S. audit firms, including certain of their network representatives, to discuss audit quality across their global networks and certain of the challenges faced in auditing public companies with

…

Skadden Discusses Proposed SEC Amendments to Auditor Independence Rules

By Charles F. Smith and Andrew J. Fuchs January 14, 2020 by renholding

On December 30, 2019, the Securities and Exchange Commission (SEC) announced proposed amendments to its auditor independence requirements. Comments on the proposed amendments will be due 60 days after publication in the federal register, meaning comments likely will be due …

Do Firms Conceal Material Misstatements by Reporting Revisions Rather than Restatements?

By Rachel Thompson October 15, 2019 by renholding

Disclosure of financial reporting errors is vital to maintaining investors’ trust in the capital markets. Yet, in recent years the number of misstatements corrected in restatements of financial reports has declined dramatically, and misstatements are now more likely to be …

How Do Auditors Determine What’s Material?

By Preeti Choudhary, Kenneth Merkley and Katherine Schipper October 2, 2019 by renholding

U.S. public company audits all include a simple step to determine whether an amount is large or significant for their clients, otherwise known as materiality. This decision influences the planning and procedures of the other facets of the audit as …

The Costs of Complying with SOX’s Internal-Controls Audit Requirement

By Jenny McCallen, Roy Schmardebeck, Jonathan E. Shipman and Robert Lowell Whited July 29, 2019 by renholding

Section 404(b) of the Sarbanes Oxley Act (SOX) requires auditors to test and report on the effectiveness of internal control over financial reporting (ICFR) for accelerated and large accelerated filers. Although Iliev (2010) documents substantial costs to initially comply with …

Auditing Is Too Important to Be Left to the Auditors!

By John C. Coffee, Jr. January 28, 2019 by renholding

Clemenceau was right.[1] Reforming a profession cannot be left to the professionals. A cascade of auditing scandals — in the U.K., the U.S., Europe, and South Africa — has convinced many that reform is necessary. The political reaction has …

The Operating Returns to Acquired Intangible Assets

By John M. McInnis and Brian Monsen November 15, 2018 by renholding

Accounting rule makers have long debated whether companies should recognize intangible assets on their balance sheets. At the heart of this debate is whether recognized values can predict future income and cash flows, or whether the high degree of measurement …

Sullivan & Cromwell Discusses ISS’ 2018 Governance Principles Survey Results

By Stephen Wilson, Marc Treviño and Melissa Sawyer October 2, 2018 by pss2150

On September 18, 2018, Institutional Shareholder Services (ISS) released the results of the first half of its Annual Policy Survey. The Annual Policy Survey is designed to gather feedback from stakeholders, including institutional investors, companies, corporate directors and other market …

Do Investors Care Who Did the Audit?

By Marcus M. Doxey, James G. Lawson, Thomas J. Lopez and Quinn T. Swanquist September 14, 2018 by renholding

In 2008, the U.S. Department of the Treasury’s Advisory Committee on the Auditing Profession called for a “standard-setting initiative to consider mandating the engagement partner’s signature on the auditor’s report” as a way to increase audit transparency.[1] The Public …

The Revolving Door between the PCAOB and Large Audit Firms

By Bradley E. Hendricks, Wayne R. Landsman and F. Dimas Peña-Romera August 2, 2018 by renholding

In a recent study, we examine the flow of workers between the Public Company Accounting Oversight Board (PCAOB) and large U.S. audit firms. The PCAOB, created by the Sarbanes-Oxley Act of 2002, oversees the audits of public companies by, among …

How Economic Conditions Affect Auditors’ Judgment

By Xianjie He, S. P. Kothari, Tusheng Xiao and Luo Zuo May 30, 2018 by renholding

Auditor judgment and technical competence are central to audits, and a lack of those qualities has led to many audit deficiencies, according to the Public Company Accounting Oversight Board (PCAOB), the UK’s Financial Reporting Council (FRC), and other regulators around …

The Irrepressible Myth That SEC Overregulation Has Chilled IPOs

By John C. Coffee, Jr. May 29, 2018 by renholding

The following is an abbreviated version of Professor Coffee’s May 23 testimony before the House Financial Services Committee’s Subcommittee on Capital Markets, Securities, and Investments. The deleted portions of his testimony relate to the specific content of proposed bills to …

Meaningful Ways to Measure Organizational Performance

By Hershey H. Friedman and Frimette Kass-Shraibman March 23, 2018 by renholding

A key principle of financial reporting is that “information should be expressed so that substance, not form, governs” [1]. What this means is that “the financial statements and accompanying disclosures of a business should reflect the underlying realities of business …

How Corporate Social Responsibility Affects Audit Fees

By Mónica LópezPuertas- Lamy December 15, 2017 by renholding

The past two decades have witnessed a dramatic increase in firms’ engagement with Corporate Social Responsibility (CSR) in response to the needs and expectations of a wide range of stakeholders. CSR practices can be understood as voluntary steps to improve …

SEC Enforcement Chief Ceresney Discusses Focus on Auditors and Auditing

By Andrew Ceresney September 28, 2016 by renholding

Good morning and thank you for that very kind introduction. It’s a pleasure to speak with you all today. Before I start, I must give our standard disclaimer that the views I express today are my own and do not …

Gibson Dunn discusses PCAOB Issuance of Another Proposal to Change Audit Report

By Michael Scanlon, Brian Lane, Lori Zyskowski and Michael Titera June 1, 2016 by ilyabeylin

The Public Company Accounting Oversight Board (“PCAOB”) recently re-proposed an audit standard to amend the form and content requirements for the independent auditor’s report on financial statements.[1] The new proposal retains the pass/fail model present in the existing audit …

Are Voluntary Internal Controls-Related Audit Report Disclosures Informative in IPOs?

By Keith Czerney November 18, 2015 by ilyabeylin

The Sarbanes-Oxley Act of 2002 (SOX) requires management and auditors to opine on the effectiveness of internal controls for many public companies. One intention of SOX is to improve the reliability of information public companies provide to the financial markets …

1 2 Next »

The CLS Blue Sky Blog

Columbia Law School's Blog on Corporations and the Capital Markets

audit