From an accounting perspective, the SEC advises the accounting profession on accounting or auditing issues that arise in the administration of the federal securities laws. They also make sure that investors have material information to make informed investment decisions, including investigating insider trading, market manipulation and accounting related fraud.
As a CPA, I do not perform audits on publicly traded companies, but I know other CPAs that do. The SEC decides when there are corporations that have allegedly violated Generally Accepted Accounting Principles, and then bring actions against their audit firms and individual auditors. The SEC knows that federal securities laws rely heavily on auditors and professionals who provide assurance in so many ways. Their concern is to make sure the auditors remain above the fray by staying independent of their audit clients. That it is easier said than done. There are subtle ways to report something that could mislead an investor on purpose. Think of famous prior auditor lapses in independence, such as Enron, MCI WorldCom, even Bernie Madoff.
It is acknowledged that some folks out there are not honest unless forced to be. Their philosophy in life is something like, “If I can get away with doing something bad, then why not?”
Given that fact, I for one, am glad to have a strong and independent SEC out there holding companies and their auditors to the highest level of integrity.
One of their current focuses is to get companies and their auditors to focus on emerging issues with respect to disclosure of impact. We are still dealing with the fallout of COVID-19, but there are other current issue such as the Ukraine conflict, labor shortages, inflationary pressures, rising interest rates, volatility, and foreign exchange rates that have risk factors impacting a company’s ability to be profitable.
The good old SEC’s focus on such issues benefits us little CPAs in the trenches, too.
None of our clients are publicly traded, but I can tell you that we regularly discuss similar topics (inflation, labor shortages, supply chain disruptions, and rising interest rates too) and how the clients can address these current issues and their impact on the ongoing success of their business.
In my world, I may not be concerned about public investors, but private owners, lenders, buyers and sellers can be impacted by reporting something wrong or even unintentionally misleading. Accurate and complete communication is much of what the SEC is concerned about, and so are all CPAs.
So, there you have it, a federal agency that has some basically good benefits to a common person. Not all government is bad.
Have you heard? 1 Chronicles 12:21 says, “They helped David against the band of raiders, for they were all mighty men of valor and were captains in the army.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.