As you've probably heard by now, the definition of materiality is up for debate. Back in September, the FASB said they'd like to go with the Supreme Court's definition and investor advocates think that's a terrible idea. Businesses claim that disclosure overload is making everything less informative and and some scholarship agrees.
The latest in this literal war of words comes from the PCAOB Standing Advisory Group that Francine McKenna reported on today and the effect of FASB's proposal would not be insignificant:
PCAOB Chief Auditor and Director of Professional Standards Martin Bauman said the proposals would change the relationship between the auditor and the audit committee that’s now mandated by law. “The current standards under Sarbanes-Oxley and the PCAOB audit standards require auditors to present …misstatements and omitted disclosures [to the audit committee],” Bauman said at the meeting.
In other words, the Board believes that the FASB's proposal allows management to circumvent the requirement of auditors to report on omitted disclosures to the audit committee.
Which, oddly enough, is one of the things, audit committees don't like!
In a letter to the FASB supporting the proposals Dennis R. Beresford, executive in residence at the University of Georgia’s JM Tull School of Accounting and a retired audit committee member, suggested that one reason for the proposals may be audit committees feeling overworked. “At a recent meeting with a number of current audit committee members,” Beresford wrote, “one observed (with much head shaking agreement from the others in the room), that he gets these ‘42 page letters from auditors that no one really reads or understands.’”
I admit that accounting and auditing doesn't always make for breezy reading, but it's funny to learn that audit committee members aren't even doing the basic requirements of their job. Shouldn't people nominated for board seats know that it's possible they could get stuck on the junk drawer committee? It's not all smoke-filled rooms and whiskey swilling, you know.