What Public Companies and Auditors Need to Know About Recent SEC and PCAOB Updates

Regulatory priorities are shifting in ways that directly affect how public companies prepare disclosures, manage audits and apply professional judgment. Recent updates from the SEC and PCAOB signal a clear focus on improving the relevance of information provided to investors while reinforcing expectations around audit quality, independence and accountability. For companies and auditors alike, the message is consistent: simplify where possible, be precise where it matters and maintain discipline as standards and oversight continue to evolve.

Taken together, these updates offer important insight into where regulators are heading and what they expect from issuers, audit committees and audit firms in the near term. From renewed attention on disclosure quality and non-GAAP measures to ongoing scrutiny of audit execution and the responsible use of emerging technologies, the themes emerging from recent SEC and PCAOB discussions provide a useful road map for areas that may draw increased focus in filings, audits and regulatory reviews.

SEC Priorities

Streamlining disclosures without losing investor value

Chairman Paul Atkins and Chief Accountant Kurt Hohl outlined an investor-focused agenda aimed at simplifying regulations and improving disclosure relevance.

Key initiatives include:

• Disclosure rationalization: The SEC plans to reduce the cost and volume of disclosures, with particular focus on risk factors and executive compensation. Larger projects will be broken into smaller proposals beginning in 2026.
• Corporate governance reforms: Efforts are underway to curb securities litigation and depoliticize shareholder processes while maintaining appropriate investor protections.
• Clearer crypto guidance: The SEC signaled a move away from regulation by enforcement toward clearer rules, including coordination with FASB on crypto accounting standards.
• Audit oversight modernization: Discussion included potential PCAOB alignment with firm-level quality management systems under ISQM 1, modernizing interim auditing standards and increasing global convergence.

FASB Updates

Standards that will affect implementation planning

FASB shared updates on several finalized and emerging standards that may affect financial reporting timelines and resource planning, including digital assets, equity classification refinements and post-implementation reviews (e.g., leasing, CECL).

Notable developments include:

• Internal-use software: Updated guidance modernizes development models and introduces more flexible, PP&E-style disclosures.
• Environmental credit programs: New guidance addresses recognition, measurement and disclosure.
• Current Expected Credit Losses (CECL) refinements: Updates include purchased seasoned loans guidance and practical expedients for short-term receivables.
• Government grants: The first authoritative U.S. GAAP guidance is included for business entities receiving grants.
• Derivative scope and hedge accounting improvements: Clarifications address operational contracts and LIBOR-related challenges.

PCAOB Outlook

Audit quality remains central focus

PCAOB Acting Chair George R. Botic, reinforced that audit quality, not speed, remains the priority, even as firms adopt new tools and methodologies. He also emphasized points within global inspections, transparency initiatives (e.g., Form AP, CAMs) and investor protection.

Key audit imperatives include:

• Independence and professional judgement remain critical.
• Critical Audit Matters (CAMs) continue to be an area of focus.
• A culture that prioritizes audit quality over deadlines is necessary.

Inspection observations

Christine Gunia, PCAOB director of registration and inspection, reported improved inspection results across firms of all sizes.

Key drivers of high-quality audits include:

• Leadership and culture: Strong tone at the top and robust quality control systems
• Specialist involvement: Engaging experts throughout the audit for complex areas
• Tailored risk assessment: Customized risk evaluations by industry, business and transaction level

AI in Auditing

Use with discipline, not dependence: AI is reshaping the profession, with widespread adoption of GenAI by firms and issuers. PCAOB Chair Botic emphasized maintaining professional judgment and skepticism, warning against overreliance on technology that could erode critical thinking and independence.

SEC Division of Corporate Finance Focus Areas to Watch

SEC staff highlighted several recurring disclosure issues, including:

• Segment reporting: Heightened scrutiny following ASU 2023-07, with emphasis on clear, entity-specific explanations
• Non-GAAP measures: Continued zero tolerance for misleading or poorly reconciled metrics
• Financial statement presentation: Common issues include improper netting in cash flow statements and incomplete income statement classifications under Regulation S-X.
• Predecessor financials: Increasing complexity in spinoffs and intellectual property transactions, requiring fact-specific analysis

What Public Companies and Audit Committees Should Do Now

As regulatory expectations continue to evolve, public companies and audit committees should take a fresh look at how these priorities translate into day-to-day practices. This includes reassessing disclosures to confirm they are clear, company-specific and focused on information investors actually use, rather than relying on boilerplate language. Organizations should also evaluate their readiness for recently issued and emerging accounting standards, particularly where implementation may affect systems, controls or internal coordination across finance, IT and operations.

At the same time, audit committees and management teams should remain focused on audit quality fundamentals, including independence, professional judgment and effective oversight of complex or high-risk areas. As technology and AI tools become more embedded in financial reporting, it will be important to establish appropriate governance, documentation and controls around their use. Maintaining a balanced approach — one that leverages technology while reinforcing accountability and skepticism — will help organizations respond confidently to regulatory scrutiny and evolving expectations.

Weaver helps public companies, audit committees and finance teams interpret regulatory developments and apply them in a practical, defensible way. If you have questions about how these updates may affect your organization, contact us to start a conversation.

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