Financial reporting and internal controls
This quarter, audit committees are prioritizing how they navigate macroeconomic conditions and adapt to the shifting legislative and regulatory landscape. They are actively evaluating how ongoing economic uncertainty and changes in the business environment will impact financial reporting processes.
Key financial reporting developments to watch this quarter are highlighted below. Please download the full report for details.
- New guidance from FASB on environmental credit programs
- New guidance on paid-in-kind dividends on equity-classified preferred stock
- Updates on tariff refunds and reminders on accounting considerations
- New COSO guide on internal controls over GenAI
SEC rulemaking and other regulatory considerations
SEC Chairman Paul Atkins has framed the Commission’s plans for modernizing its rulebook around an advance, clarify and transform (A-C-T) strategy. The A-C-T strategy aims to advance by updating legacy regulatory frameworks to reflect how markets operate today; clarify the regulatory jurisdiction between the SEC and Commodity Futures Trading Commission (CFTC) to support innovation, particularly around crypto assets; and transform the Commission’s rulebook by streamlining requirements that call for or result in the disclosure of immaterial information. Consistent with this framing, Chair Atkins has emphasized plans to provide clearer pathways for innovative products to enter the market, signed a memorandum of understanding with the CFTC to align policymaking and collaborate on examinations and enforcement matters, and directed the SEC staff to revisit disclosure requirements using a materiality lens.
Chair Atkins has signaled an ambitious pace of rulemaking for this year and into 2027. In recent remarks, he said that the SEC will “probably have 30 proposals out this year” and expects “another 30” proposals next year.
The SEC recently issued proposals to give public companies the option of filing semiannual rather than quarterly interim reports; simplify the filer status framework and allow scaled disclosure for more companies; and enhance the registered offering process. Comments on these proposals are due in July. Additionally, the Commission has submitted several rule proposals to the White House for review, a new requirement for all independent regulatory agencies like the SEC under an executive order released last year. Two of those proposals aim to provide a safe harbor for crypto issuers seeking to raise capital and rescind the climate disclosure rules finalized by the previous Commission. These are expected to be proposed by the SEC for comment over the next several months.
The SEC also released its enforcement results from FY25, reporting 456 filed enforcement actions, down 22% from FY24 (the last full year under then-SEC Chair Gary Gensler). The release states that the Commission has refocused the enforcement program on offering fraud, market manipulation, insider trading and other cases that directly harm investors and the integrity of the US securities markets. In his statement in the accompanying press release, Chair Atkins said the results demonstrate a “course correction” in enforcement priorities, moving “from approaches that prioritized volume and record-setting penalties” toward a “renewed emphasis on holding individual wrongdoers accountable.”
Separately, the SEC named David Woodcock as the Director of the Division of Enforcement following Judge Margaret Ryan’s resignation in March. The agency also has created a new “SOX Group” within the Division of Enforcement to investigate and litigate matters involving potential violations of auditing and related professional standards and provisions of the Sarbanes-Oxley Act and other relevant federal securities laws.
Download the full report for more details including questions for audit committees to consider.
