SEC Chair Jay Clayton, Chief Accountant Sagar Teotia, and Director of the Division of Corporation Finance William Hinman offered observations and reminders concerning the oversight and financial reporting responsibilities of audit committees.
Based on observations from the past year, the regulators urged audit committees to:
- curate a "tone at the top " that "supports the integrity of the financial reporting process and the independence of the audit";
- periodically review the auditor's and issuer's monitoring processes for compliance with auditor independence rules;
- engage proactively with management and auditors to implement the new Generally Accepted Accounting Principles ("GAAP") standards;
- work with management to fix any internal control over financial reporting issues; and
- understand specifically (i) management's non-GAAP measures and metrics, (ii) reference rate reform, and (iii) critical audit matters.
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