Two major accounting firms have issued publications that seek to anticipate questions that shareholders are likely to raise at 2014 annual meetings. Both firms’ lists include several topics related to financial reporting and other areas of audit committee responsibility.
PWC’s publication, Shareholder questions: Management’s considerations for 2014 annual meetings, lists questions that may arise in twelve areas. Those related to financial reporting and auditing include:
SEC Enforcement. What changes has the Company made to its internal controls or financial reporting systems to safeguard against wrongdoing? What policies and procedures does the Company have in place to ensure compliance with securities laws? Has the Company implemented any new technologies to identify anomalies and inconsistencies in financial data?
Dodd-Frank Whistleblower Program. Is the Company involved in any lawsuits related to whistleblower allegations? If so, could they impact its financial position or results of operations? Is the Company aware of any whistleblower allegations reported to the SEC?
Conflict Minerals. What steps has the Company taken to comply with the conflict minerals rule? How does the Company’s progress compare with the rest of the industry? What are the related compliance costs?
Revenue Recognition. How is the Company preparing for the imminent revenue recognition standard? Has the Company considered the impact of the new guidance on its accounting policies, systems, processes, and controls? How will revenue recognition change for the Company?
Non-GAAP Measures. How has the Company evaluated its non-GAAP financial measures to ensure transparency and appropriateness considering continued regulatory scrutiny? Is the Company using consistent non-GAAP financial measures in documents provided to investors and in documents filed with the SEC? Has the Company been challenged by the SEC on any non-GAAP measures?
Accounting for Income Taxes. What is the Company doing to make its tax reporting more transparent and easier to understand? How has the Company responded to the SEC’s increased focus on
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disclosure? Has the Company considered the financial reporting impact of proposed tax legislation?
Impairment of Financial Assets. How would the FASB’s impairment proposal impact the Company’s financial statements? What is the Company’s process for evaluating impairments? Does the Company foresee a potential risk of future impairments that could affect its financial statements?
Other topics on the PWC list include executive compensation and say on pay, global megatrends, cyber security and data privacy, director elections (including board declassification and majority voting), and board leadership. For audit committees with risk management responsibilities, the cyber security and data privacy topic is particularly relevant.
There are eleven items on BDO USA’s list of topics that may arise at 2014 shareholders meetings. Those related to financial reporting and other areas of audit committee responsibility are:
New COSO Framework. “Is the company in compliance with the new COSO 2013 Internal Control – Integrated Framework (2013 Framework)? If not, why not? Will major changes be necessary to comply? What is the timeframe and what are the costs?”
Conflict Minerals. “Shareholders may want to know if companies are conducting country-of-origin inquiries to ensure that [their] supply chains are conflict free.”
Auditor Tenure. “Shareholders may want to know the process the company uses to select an audit firm, how long the current firm has been in place, when the last time the audit engagement was put out for bid and how the audit committee ensures that the audit firm performs quality work.”
Additional topics on the BDO list are M&A opportunities/takeover defenses, spinoffs, global economic concerns, succession planning, accessing public equity markets, cyber security, executive compensation, and disaster planning. As noted above, several of these topics are relevant to audit committee risk management.
Comment: Some of the accounting matters suggested seem a bit more technical than are likely to arise at the typical shareholders meeting. Nonetheless, the PWC and BDO lists provide a good overview of the kinds of issues that could be on the minds of shareholders.