Responding to comments filed with the SEC, NASDAQ has withdrawn its proposed rule to require listed companies to establish and maintain an internal audit function.
“In light of the breadth and nature of the comments from our issuer community, and others, NASDAQ has determined to withdraw the proposal so that we may adequately consider these comments,” the exchange stated in a rule update rule update to its members. “NASDAQ remains committed to the highest standards of corporate governance, and believes it is important that listed companies have appropriate mechanisms and processes in place to review risks and the system of internal controls. It is our intent to revise the proposed rule, taking into account the comments, and resubmit it.”
The SEC received 42 comments on the original NASDAQ proposed rule, many of which pointed out concerns about the costs of creating such a function and the need to limit the role to just financial reporting risks.
The proposed rule would have required those companies listed on the exchange before June 30 to establish an internal audit function by December 31, 2013. For those companies listed after June 30, they would have needed to have such a function prior to listing.
Audit committee members in Asia, Europe and the United States confront many of the same opportunities and challenges in meeting their responsibilities to shareholders, according to leading organizations representing public company auditors.
Global Observations on the Role of the Audit Committee highlights common themes identified during a multi-continent discussion series on enhancing public company audit committee effectiveness, including the role of the audit committee and the scope of its responsibilities, increasing audit committee transparency, and educating stakeholders on the role of the audit committee.
During January and February of 2013, the Federation of European Accountants (FEE), the Institute of Chartered Accountants in Australia (ICAA), and the US Center for Audit Quality (CAQ), co-sponsored a series of three roundtable discussions in Brussels, Hong Kong, and New York City, attended by members of governance and audit committee communities in the respective jurisdictions. The objective was to provide a forum for representatives from the global audit committee community to share views on the state of audit committee performance.
“The report exposes the fact that audit committees – at companies based in the United States, Asia and in Europe – are facing and embracing many of the same issues,” said CAQ Executive Director, Cindy Fornelli. “Discussions are taking place in every corner of the globe about identifying leading audit committee practices, ensuring greater consistency in the performance of audit committees across the spectrum of public companies, and enhancing transparency about how they meet their obligations to investors.”
At its May 23, 2013 meeting, the FASB tentatively decided to retain the effective control model for repurchase agreements contained in the current proposal and require additional disclosures for transfers of financial assets with contemporaneous agreements that result in the transferor retaining the risks associated with the transferred financial asset.
This decision is a significant change from the initial exposure draft, which would have required a change in the accounting for a particular type of repurchase agreement referred to as a repo-to-maturity. Under current guidance, these transactions are treated as sales with agreements to repurchase. Under the proposal, they would have been treated as secured borrowings.
The project was initiated in response to concerns raised by stakeholders about the accounting for certain repurchase transactions.
For more information on repurchase agreements, directors may want to read the following PwC publications: