On July 1, 2015, the Securities and Exchange Commission (SEC) published a concept release seeking comments on the adequacy of the current audit committee disclosure requirements, with a focus on the audit committee’s reporting of its oversight of independent auditors. The SEC is seeking comments on whether the SEC’s current rules governing disclosure of audit committee activities permit investors to understand and evaluate audit committee performance. The concept release notes that the majority of disclosure requirements applicable to audit committees were enacted at the time Item 407 was added to Regulation S-K in 1999, and that the regulations have not changed substantively since that time. However, since 1999, there have been significant changes in the role and responsibilities of audit committees arising out of, among other things, the Sarbanes-Oxley Act of 2002, enhanced listing requirements for audit committees, and enhanced requirements for auditor communications with the audit committee arising out of the rules of the Public Company Accounting Oversight Board (PCAOB).
The concept release also seeks comments on whether issuers should be required under SEC rules to provide additional insight into the audit committee process for selecting and overseeing an independent auditor, including the process for appointing or retaining the auditor, the qualifications of the auditor, and whether certain members of the auditor’s team, such as the engagement partner, should be named in SEC filings.
Some investor groups, including the Council of Institutional Investors, have called for additional audit committee disclosure. The PCAOB also is considering similar initiatives to require additional disclosure relating to auditors. The comment period for the audit committee concept release closes on September 8, 2015.