As we blogged back in June, attention to detail is an important part of successful SEC reporting. Regulation S-X Article 10 is the source of another important SEC reporting detail. This part of S-X contains the interim financial statement requirements for Form 10-Q.
(A quick side note – as we discussed in our previous postthis is where the new requirement for information about changes in shareholders’ equity in Form 10-Qwas added by the Disclosure Update and Simplification rule.)
Article 10, as it has been updated by Disclosure Update and Simplification, includes this fairly simple language concerning the auditor’s review of the financial statements in Form 10-Q:
(d) Interim review by independent public accountant. Prior to filing, interim financial statements included in quarterly reports on Form 10-Q (17 CFR 249.308(a)) must be reviewed by an independent public accountant using applicable professional standards and procedures for conducting such reviews, as may be modified or supplemented by the Commission. If, in any filing, the company states that interim financial statements have been reviewed by an independent public accountant, a report of the accountant on the review must be filed with the interim financial statements.
The language we bolded and underlined in this excerpt was in this paragraph before and after the update. And it is a fairly simple thing to confirm with your auditor, via email or other vehicle, that they are done with the review before you file.
As you will see in this enforcement division press release, paying attention to this detail is important. In what is apparently a kind of “sweep” action, five companies paid fines averaging $50,000 each for failing to observe this requirement. It is also interesting to note the SEC and the PCAOB worked together on these actions.
As always, your thoughts and comments are welcome!