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Top officials and staff from the SEC, the PCAOB and the FASB gathered in mid-December in Washington, D.C. at the 2018 AICPA Conference on Current SEC and PCAOB Developments to provide year-end accounting, auditing and disclosure guidance to corporate management, audit committees and outside auditors. In this Alert, we focus on key takeaways for management, as preparers, and the audit committee, as overseers, of the 2018 annual report on Form 10-K and ongoing financial reporting in 2019. Specifically, we discuss the regulators’ expectations for enhanced disclosure and related controls in the following areas:
- Escalating risks around cybersecurity, Brexit and the transition away from LIBOR
- “New GAAP” and the end of SAB 118 provisional income tax accounting
- Non-GAAP financial measures, which remain on the SEC’s radar screen
- Identification and disclosure of material weaknesses in internal control over financial reporting (ICFR)
We also discuss the “dry runs” that regulators are encouraging the audit committee, outside auditor and management to make together in preparation for the impact of the PCAOB’s new critical audit matters (CAMS) standard, which will apply to the fiscal 2019 audit of calendar-year large accelerated filers. We then venture a few predictions about what else to expect in 2019 based on the SEC and PCAOB regulatory agendas. We conclude with selected questions for use by audit committees in their dialogues with management and the outside auditor, as well as in their own annual self-evaluations.