SEC Chief Accountant Stresses Continued Importance of High-Quality Financial Reporting

July 9, 2020

Also on June 23, 2020, with many public companies preparing for their second quarter financial reporting process, the SEC’s Chief Accountant issued a statement emphasizing the continued importance of high-quality financial reporting in light of the significant impacts of COVID-19.  The Office of the Chief Accountant (OCA) issued a similar statement on April 3, 2020, when many public companies were in the midst of their first quarter financial reporting process.

Among other things, the June 23 statement:

  • Recognizes that many companies have been required to make significant judgments and estimates to address a variety of accounting and financial reporting matters related to COVID-19, and repeats the OCA’s historical practice of not objecting to well-reasoned judgments;
  • Emphasizes the importance of disclosure controls and procedures (DCP) and internal control over financial reporting (ICFR) and encourages consideration of additional risks associated with operating in a telework environment;
  • Reminds companies and their auditors of their responsibility in each reporting period, including interim periods, to consider the company’s ability to continue as a going concern; and
  • Stresses the vital role of engaged audit committees in these times of rapid change and increased uncertainty.

The June 23 statement also reminds all participants in the financial reporting process that the OCA is available for consultation regarding questions that arise due to COVID-19 pandemic.  Last quarter, issues addressed by the OCA in such consultations included the financial reporting ramifications of the CARES Act, debt modifications, hedging, consolidation, business combinations, lease concessions, revenue recognition and income taxes.

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