March 22, 2022

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COSO Expected to Issue Updated Framework in May

The Board of Directors of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) has approved its updated Internal Control – Integrated Framework: 2013 (Framework), and expects to issue it on Tuesday, May 14, 2013. The issuance is also expected to include a volume of Illustrative Tools for Assessing Effectiveness of a System of Internal Control. COSO also expects to issue simultaneously Internal Control over External Financial Reporting: A Compendium of Approaches and Examples, which has been developed to assist users when applying the Framework to external financial reporting objectives. All of these documents will be available on Accounting Research Manager when they become available from COSO.

Authored by PwC under the direction of the COSO Board, the Framework and related illustrative documents are intended to help organizations in their efforts to adapt to increasing complexity and pace of change, to mitigate risks to the achievement of objectives and to provide reliable information to support sound decision making.

The news release is available from COSO here.

IIA Releases "Pulse of the Profession" Results

The Institute of Internal Auditors’ (the IIA’s) Executive Center has conducted their semiannual “Pulse of the Profession” survey to assess the state of the internal audit profession in North America and identify trends and emerging issues in the internal audit profession and its stakeholders. The report titled, “The Pulse of the Profession 2013: Time to Seize the Opportunity,” shows a growing number of internal audit functions are reporting to levels within the organization that enhance their independence, and an increased emphasis is being placed on assurance over risk management effectiveness and strategic risk. At the same time, there appears to be an opportunity for improving organizational ethics.

Among the survey’s most significant findings, 70% of participating chief audit executives (CAEs) overall and 75% of Fortune 500 participants indicate their organization’s CAE currently reports administratively to the CEO or the CFO, with an elevating shift from the CFO to the CEO. As expected, the majority of CAEs also report functionally to the full board or its audit committee. Findings also reveal opportunities remain to strengthen the ethical tone of leadership at many organizations. Nineteen percent of all and 32% of Fortune 500 respondents report that one or more senior officers of their organization have been dismissed for ethical/conduct lapses. Only a slim majority of respondent organizations conduct ethics training for new hires and, discouragingly, one-fifth train existing employees less frequently than once a year.

The press release is available from the IIA here.

The report is available from the IIA here.

FASB Comment Period Ending

In January 2013, the FASB issued for public comment a proposal to improve financial reporting about repurchase agreements and other transfers with forward agreements to repurchase transferred assets. Proposed Accounting Standards Update, Transfers and Servicing (Topic 860): Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings, would clarify the guidance for distinguishing these transactions as either sales or secured borrowings and improve disclosures about them. Comments are due by Friday, March 29, 2013.

Determining whether a transfer of financial assets in a repurchase agreement (and other transactions with similar attributes) is a sale or an on-balance-sheet secured borrowing often rests on an evaluation of whether the transferor maintains “effective control” over the transferred asset. Under current U.S. GAAP, effective control is maintained by a transferor, and therefore secured borrowing accounting is required, if there is a contemporaneous forward agreement to repurchase the same or “substantially-the-same” financial asset at a fixed price from the transferee before its maturity. However, effective control is not maintained if a transferor will not recover the transferred asset at the conclusion of the agreement because the asset has matured, resulting in sale accounting if other criteria are met. Stakeholders have said that such an accounting distinction is unwarranted because, during the term of both types of transactions, the transferor retains exposure to the credit risk related to the transferred asset and obtains certain benefits from the asset.

The proposed guidance would eliminate the distinction between agreements that settle before the maturity of the transferred asset and those that settle at the same time as the transferred asset matures. As a result, both types of transfers with forward agreements to repurchase the transferred assets or “substantially-the-same” assets at a fixed price would maintain the transferor’s effective control during the term of the agreement and would be accounted for as secured borrowings. For these types of arrangements, the proposed guidance would result in financial reporting that is more comparable with IFRS. When the transferor does not maintain effective control over a transferred financial asset, the transaction would be required to be assessed under the remaining derecognition conditions in U.S. GAAP to determine whether it should be accounted for as a secured borrowing or sale with a forward repurchase agreement.

The proposed guidance would also clarify the characteristics of assets that may be considered “substantially the same” and would require new disclosures for certain transfers with forward agreements to repurchase the transferred assets.

In addition, the proposed amendments would change the accounting for a transfer of a financial asset and contemporaneous repurchase agreement financing that asset between the same counterparties (repurchase financings). The proposed guidance would eliminate the current requirement to account for the initial transfer and related repurchase agreement on a combined basis in some circumstances, and would instead require separate accounting for the initial transfer and the repurchase financing.

The proposal is available here.

SEC Staff Publishes Presentation Slides on Issues Facing Smaller Issuers

The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published slides that were presented at the “Forums on Auditing in the Small Business Environment” hosted by the PCAOB throughout 2012. Participants of these forums were auditors from smaller registered public accounting firms. According to the SEC staff, these slides are intended to provide a sampling of issues that the Corp Fin staff frequently encounters when reviewing filings for smaller public companies as well as an overview of developments within Corp Fin. The slides are accompanied by detailed notes that provide additional context.

Copies of the slides are available here.

Senate Committee Approves Mary Jo White for SEC

The United States Senate Committee on Banking, Housing, and Urban Affairs (the Committee) voted nearly unanimously to approve Mary Jo White as a member of the SEC. The full Senate is expected to vote on Ms. White’s confirmation to the SEC as early as later this week. Ms. White was nominated by President Barack Obama to be a member of the SEC and is expected to serve as the chairman if confirmed by the Senate.

The Committee also narrowly voted to approve Richard Cordray to be Director of the Consumer Financial Protection Bureau (CFPB). The CFPB was established through the Dodd-Frank Act to protect consumers by carrying out federal consumer financial laws. The full Senate must still vote on Mr. Cordray’s nomination.

An archive of the hearing is available here.

Our strategic partnership with CCH, a Wolters Kluwer business, has enabled us to craft our Audit & Accounting eAlert. The articles have been selected from CCH’s Accounting Research Manager Daily and/or Weekly Summary and we hope you find them valuable and relevant. Please feel free to contact ParenteBeard LLC at [email protected] if you have any questions related to these stories or ParenteBeard's services.

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