SEC Chief Accountant Makes Statement on Risk Assessment

SEC Chief Accountant Paul Munter recently released a statement addressing the importance of risk assessment to effective financial reporting and internal controls. Mr. Munter indicated his belief that the focus of both auditors and management on assessing financial reporting risks has sometimes been too narrow, potentially resulting in a failure to address or disclose broader, more material risks. Accordingly, he outlined management’s obligations related to (1) taking a more “holistic approach” to risk assessment (e.g., by considering entity-level risks), (2) designing appropriate processes and controls, and (3) identifying important information to disclose to investors. Mr. Munter also discussed “auditors’ responsibilities as gatekeepers to hold management accountable in the public interest.”