SEC Chief Accountant Wesley Bricker made recommendations to improve the quality of financial reporting for regulatory agencies and firms. He also reviewed developments in non-Generally Accepted Accounting Principles (“non-GAAP”) measures and other areas.
In remarks before the Baruch College Financial Reporting Conference, Mr. Bricker encouraged standard-setting bodies to maintain distinct financial reporting frameworks for general and specific purpose reporting. He explained that general purpose financial reporting should continue to provide crucial business and financial information to shareholders while specific purpose financial reports should remain limited to a “special purpose framework” in order to address more specific needs.
Mr. Bricker identified the means by which firms can improve the quality of interim reviews and annual audits. He stated that firms should implement an “effective firm-wide (enterprise) risk management system” to enhance audit firm governance. He encouraged “independent, diverse thinking” on audit committees in order to improve corporate governance. He emphasized the importance of improving the “tone and culture” of the company in enabling auditors to accomplish their work.
Mr. Bricker mentioned that the SEC is issuing a request for public comment to address compliance challenges related to auditor independence rules. Mr. Bricker promised that amendments to the accounting standards will significantly improve the quality of financial reporting for investors. The amendments include: (i) requiring calendar year-end public companies to report revenue from contracts with customers; (ii) standardized company reporting requirements to help investors compare financial statements across companies; (iii) improving reporting and disclosures of non-GAAP and GAAP to help investors identify how management monitors performance and analysis; and (iv) enhancing the quality of disclosures as to market risk.