WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission is concerned that financial auditors are not living up to the requirements of securities laws, Chair Mary Jo White told a meeting of certified public accountants on Wednesday.
“In the worrisome column, we still observe too many instances where companies and their auditors have not discharged their responsibilities adequately under the securities laws and professional standards,” White said at the national conference of the American Institute of CPAs.
She said recent inspections by the Public Company Accounting Oversight Board had found “significant deficiencies” in assessing and responding to risks of misstatement, auditing accounting estimates, and work performed by some firms in cross‑border audits.
White also noted deficiencies in auditing the effectiveness of internal controls over financial reporting, which are intended to ensure that a company’s financial statements are prepared in accordance with U.S. generally accepted accounting principles.
Reporting and auditing have become areas of increased focus for the top financial regulator in the United States. White pointed to recent enforcement actions against firms for “missing or ignoring red flags.”
“Such failures are totally unacceptable,” she said.
Earlier this month, audit firm Grant Thornton LLP and two of its partners agreed to settle SEC charges that they ignored red flags and fraud risks at two publicly traded companies.
White also told the group she had growing concerns that the increasing workloads of some companies’ audit committees could keep them from overseeing independent auditors, as well as from setting up systems to handle complaints about accounting and reporting to shareholders.
For more than 10 years, an international board has worked to develop global accounting standards, and the SEC will soon discuss a proposal allowing U.S. issuers to use them to prepare supplementary information to their financial statements, White said.
Reporting by Lisa Lambert; Editing by Lisa Von Ahn