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In sports there is an old saying that you have to call them as you see them. There is no question that the Chamber has been tough on regulators when they haven’t done the right thing. However, we also give regulators kudos when they do the right thing.
Over the past two years, Chamber members have raised concerns about a dramatic increase in the costs and work related to internal controls associated with financial reporting systems. This rise in costs and burdens has been driven, in part, by Public Company Accounting Oversight Board (PCAOB) inspections. Everyone agrees that modern controls are necessary to protect investors before a business raises capital. However, every additional control that doesn’t succeed in protecting investors actually harms them by unnecessarily increasing costs for businesses and reducing returns for investors.
The Chamber convened a group of chief financial officers and accounting experts to get to the bottom of the problem and address these issues. The Chamber’s Financial Reporting Working Group met with members of the PCAOB and the Securities and Exchange Commission (SEC) to educate them on this challenge facing companies and to explore solutions.
To his credit, SEC Chief Accountant Jim Schnurr took the bull by the horns. He asked the Financial Reporting Working Group to come back with real world examples of the problem. The Chamber responded and sent a 19-page letter outlining the problems and requesting a joint stakeholder meeting to develop solutions. Schnurr convened meetings with the PCAOB and brought in businesses and auditors to roll up their sleeves and dive deep into the subject. This week, Schnurr took the next step by convening a panel of experts at the American Institute of Certified Public Accountants’ Annual Conference on SEC and PCAOB Developments to have a public discussion of solutions and provide some clarifications that will help explain what businesses, auditors and investors should be doing.
While this is the start of a much longer process, it is good to see the SEC’s chief accountant taking a proactive approach. Too often market participants and agencies view each other warily and with suspicion. This is a refreshing change — having investors, auditors, businesses and regulators getting together, exploring problems and solutions in a good faith debate and dialogue. Mr. Smith may not have come to Washington, but it looks like the can-do spirit is still around if you look for it.