(The news featured below is a selection from the news covered in the Federal Securities Law Reporter.)

SEC Updates Guide On Accounting And Disclosure Issues

On December 1, the SEC's Division of Corporation Finance updated its guidance on current accounting and disclosure issues. The new guidance addresses the preapproval of audits of employee benefit plans. The guide notes that an employee benefit plan may be an affiliate of a registrant as its plan sponsor. The SEC's independence rules relate to services provided to an issuer and its subsidiaries, but not to services provided by other affiliates. Accordingly, the independence rules do not require the audit committee of the plan sponsor to preapprove audits of employee benefit plans, but it is encouraged to do so.

When an employee benefit plan is required to file a Form 11-K, the plan is a separate issuer under the 1934 Act. As a result, the issuer is subject to the preapproval requirements. The preapproval can be provided by the audit committee of the plan sponsor or the appropriate entity overseeing the activities of the plan, according to the guidance, such as the trustee or the plan administrator.

All fees, including the fees related to the audits of employee benefit plans, must be included in the company's fee disclosure. The disclosure rules apply regardless of whether the audit committee has preapproved the fees. The staff advises that audit committees should be aware of all fees paid to the principal auditor, including the fees related to the audits of employee benefit plans. Companies may elect to separately disclose the fees paid to the principal auditor that were not subject to the preapproval requirements.

The staff also reminds registrants and their auditors that the financial statements included in a Form 11-K must be audited by an independent auditor that is registered with the PCAOB. The audit report must refer to the standards of the PCAOB rather than generally accepted auditing standards.