Audit, Accounting & Financial Reporting

Looking Forward

2022 will be the first full year with a new SEC chair and a largely new PCAOB. As of the end of 2021, the SEC and PCAOB appear to have recovered from slowdowns caused by the COVID-19 pandemic. By most reports, they are back on track with examinations and investigations and appear poised to initiate more enforcement actions over the coming year. The SEC likely will continue its increased focus on company disclosures partly aided by a notable increase in the number of whistleblower tips alleging corporate disclosure missteps. The PCAOB devoted resources to considering the audit risks resulting from the pandemic. Both agencies have signaled additional attention to accounting estimates, with the PCAOB adopting new auditing standards last year. Apart from the pandemic’s impacts, last year’s changes by the SEC and PCAOB to auditor independence rules that back away from some bright-line standards will continue to present new decisions for audit firms. In sum, 2022 appears to hold in store a notable increase in SEC and PCAOB scrutiny of exercises of discretion. Past experience indicates that those instances will bring into relief the benefits of a redoubled effort to appropriately document those judgments in real time in accordance with effective policies.