April 2025 Financial Reporting, Governance, and Risk Management
Message from Sydney Garmong, Partner, National Office
With the first quarter of 2025 in the rearview mirror, we are on to the second quarter. Spring officially arrived on March 20, and we hope you are making summer plans to enjoy some time off.
We continue to watch how changes are unfolding under the Trump administration, including leadership at federal agencies. On March 17, 2025, President Donald Trump nominated Michelle Bowman as vice chair for supervision of the Federal Reserve, pending Senate confirmation. On April 3, 2025, the Senate Banking Committee approved Jonathan Gould’s nomination as the next comptroller of the currency, voting 13-11 along party lines. The next step is a full Senate vote.
On March 27, 2025, the Securities and Exchange Commission (SEC) voted to end its defense of its climate disclosure rules. There have certainly been several twists along the way since the SEC passed the final rule on March 6, 2024. On April 9, 2025, the Senate voted 52-44 to confirm Paul Atkins as a commissioner and next chair.
Related to crypto assets, on March 21, 2025, the SEC Crypto Task Force hosted its first public roundtable, which is archived online. On March 25, 2025, the task force announced four additional roundtables, including one on crypto trading, cleverly titled, “Crypto Task Force Roundtable – Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading,” which took place on April 11.
The Center for Audit Quality posted two blogs – one on enhancing corporate ethical culture and one on strengthening fraud deterrence and detection.
Welcome to the second quarter. We look forward to keeping you informed.
Financial Institutions Executive Briefing
Get updates on accounting, governance, risk management, and compliance issues.
From the federal financial institution regulators
OCC removes reputation risk from exams
On March 20, 2025, the Office of the Comptroller of the Currency (OCC) announced that it has directed its examiners to cease examining for banks’ reputation risk. The agency will also remove references to reputation risk from its handbook and guidance issuances, including those issued jointly with other regulators. Travis Hill, acting chair of the Federal Deposit Insurance Corp. (FDIC), also announced plans to prohibit FDIC supervisors from criticizing or taking adverse action against institutions on the basis of reputational risk. Earlier in March, Tim Scott, chair of the Senate Banking Committee, introduced a new bill to remove reputational risk from the supervisory approach of all federal financial institution regulators.
Regulators announce intention to rescind 2023 Community Reinvestment Act rule
On March 28, 2025, the FDIC, the OCC, and the Federal Reserve Board (Fed) announced their intent to issue a proposal to rescind the Community Reinvestment Act (CRA) final rule and reinstate the CRA framework that was in place prior to the rule’s adoption in October 2023.
FDIC rescinds notification guidance for crypto activities
On March 28, 2025, the FDIC issued Financial Institution Letter (FIL) 7-2025, rescinding prior FIL-16-2022 which required FDIC-supervised institutions to provide prior notification before engaging in crypto-related activities. The new FIL eliminates the prior notification requirement and clarifies that supervised institutions may engage in permissible crypto-related activities. It also states that such institutions should monitor the related risks and engage with their supervisory team when appropriate.
President nominates Fed vice chair of supervision
On March 17, 2025, President Donald Trump nominated Michelle Bowman as vice chair for supervision of the Fed, pending Senate confirmation. Bowman, who has served as a member of the Board of Governors of the Federal Reserve since 2018, issued a brief statement on the nomination.
OCC launches digitalization webpage for community banks
The OCC’s new digitalization hub compiles resources for community banks, including relevant agency rules, statements, and guidance for community banks undergoing digitalization efforts. The resources include interagency guidelines on establishing safety and soundness and information security standards and third-party risk management guidance, among others.
From the Financial Accounting Standards Board (FASB)
FASB removes SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 122
In response to the release of Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 122, which rescinded SAB 121, the FASB on March 18, 2025, issued Accounting Standards Update (ASU) 2025-02, “Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122.” The ASU amends the guidance in Accounting Standards Codification 405-10-S99-1 to remove all the text of SAB Topic 5.FF, “Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for Its Platform Users,” originally added pursuant to SAB 121. The ASU is effective upon issuance.
From the Securities and Exchange Commission (SEC)
Senate confirms SEC chair
On April 9, 2025, the Senate voted to confirm Trump nominee Paul Atkins as chair of the SEC. Currently chief executive at Patomak Global Partners, Atkins previously served as an SEC commissioner from 2002 to 2008.
Corp Fin releases statements on certain proof-of-work mining activities and stablecoins
The SEC Division of Corporation Finance (Corp Fin) continued to publish clarifying statements on its views on topics related to crypto assets following a February statement on meme coins, issuing statements on proof-of-work mining activities and stablecoins. In both statements, Corp Fin provided background and defined the scope of covered crypto assets or related activity, and it concluded that transactions involving neither covered stablecoins nor covered mining activities involve the offer or sale of securities.
SEC continues Crypto Task Force roundtables
The SEC’s Crypto Task Force held its first meeting on March 21, 2025, on the topic of defining security status for crypto assets. Acting Chair Mark Uyeda and Commissioners Crenshaw and Peirce issued statements and posed questions for the task force’s consideration and discussion. A recording of the roundtable is available on the SEC website.
The task force also announced more roundtables:
- “Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading,” which took place on April 11, 2025
- “Know Your Custodian: Key Considerations for Crypto Custody,” April 25, 2025
- “Tokenization – Moving Assets Onchain: Where TradFi and DeFi Meet,” May 12, 2025
- “DeFi and the American Spirit,” June 6, 2025
SEC holds AI roundtable
On March 27, 2025, the SEC hosted a roundtable on the use of artificial intelligence in the financial industry. Uyeda, Crenshaw, and Peirce provided opening remarks. Panel topics included: the benefits, costs, and uses of AI in the financial industry; fraud, authentication, and cybersecurity; AI governance and risk management; and a look at future trends in AI. Recordings of the roundtable panel sessions are available on the SEC website.
SEC votes to end defense of climate disclosure rule
On March 27, 2025, the SEC voted to end its defense of its 2024 final rules requiring enhanced and standardized disclosures related to climate-related risks and greenhouse gas emissions metrics. The effective date of the final rule was previously stayed in response to pending litigation in the U.S. Court of Appeals for the 8th Circuit. As a result of the SEC’s withdrawal of its defense, SEC counsel will not advance the arguments in the brief previously filed by the agency, and the SEC yielded any oral argument time to the court.
Corp Fin issues updated C&DIs
On March 20, 2025, Corp Fin published several updated compliance and disclosure interpretations (C&DIs), providing clarifications on various registration statement fact patterns. On April 11, 2025, Corp Fin published new C&DIs related to termination of reporting obligations in special purpose acquisition company (SPAC) transactions and executive compensation clawback disclosures.
From the Public Company Accounting Oversight Board (PCAOB)
PCAOB posts 2024 Annual Report
On April 1, 2025, the PCAOB released its 2024 Annual Report, which includes the PCAOB’s financial results, audited financial statements, auditor’s report, and management’s report on internal control over financial reporting. The report provides an overview of how the PCAOB has worked to protect investors by enhancing inspections, modernizing standards and rules, enforcing regulations, and prioritizing organizational effectiveness through stakeholder engagement. It also details the PCAOB’s activities and achievements in 2024.
PCAOB releases update on 2024 inspection activities
On March 31, 2025, the PCAOB released a spotlight report titled “Staff Update on 2024 Inspection Activities,” which summarizes the results of 2024 inspections including common deficiencies; reports on observed improvements; describes the drivers of improvement and the PCAOB’s efforts to enhance audit quality; and details the overall inspection approach. The report indicates that inspection staff observed significant reductions in aggregate deficiency rates across all categories of inspected firms in 2024.
The focus areas in these inspections included recurring deficiencies; evaluating audit evidence obtained by the auditor; the auditor’s understanding of the company and its environment; the use of other auditors; going concern assessments; and critical audit matters. The report outlines common deficiencies identified in auditing internal control over financial reporting, specific financial statement areas, PCAOB standards or rules, and independence issues. The top financial statement area deficiency categories were identified as revenue and related accounts, inventory, accounts impacted by business combinations, investment securities, allowance for credit losses, and long-lived assets, goodwill, and intangible assets.
PCAOB explains why audits matter
On March 26, 2025, the PCAOB published an investor bulletin titled “Why Audits Matter,” which offers insights into the significance of financial statement audits. The bulletin elaborates on how audits establish trust and enable investors to make informed decisions regarding the purchase, retention, or sale of company securities based on financial information that reflects the company’s performance and financial health. The fundamental purpose of a financial statement audit is to provide reasonable assurance that the financial statements are free from material misstatements, whether due to error or fraud.
From the Center for Audit Quality (CAQ)
CAQ posts takeaways on enhancing corporate ethical culture
On March 19, 2025, CAQ Director of Anti-Fraud Initiatives Lucy Wang shared her key takeaways from the Anti-Fraud Collaboration’s recent posting of “The Impact of a Changing Work Environment on Corporate Culture.” Wang explores strategies for maintaining an ethical corporate culture in evolving work environments, such as remote and hybrid models. She highlights the risks of employee disconnection and potential fraud, emphasizing the importance of reinforcing ethical values and strong corporate culture. Key strategies highlighted include revisiting hiring processes, assigning peer mentors, assessing governance and risk management, and leveraging technology for fraud detection. The post also stresses the need for flexibility, effective change management, and strong leadership to foster an ethical culture. In noting that there is not just one approach to establishing a strong ethical culture, Wang listed a variety of tools that organizations may consider to enhance their culture, reinforce ethical behavior, and deter fraud.
CAQ shares insights on strengthening fraud deterrence and detection
On March 10, 2025, Wang posted insights from the CAQ’s recent Fraud Forum. The forum gathered financial reporting stakeholders to discuss emerging fraud risks and best practices. Key points include the importance of understanding fraud’s impact, the human element in prevention, and fostering a strong ethical culture. Wang underscores the role of hotlines and internal reporting in fraud detection and the evolving expectations of investors. Practical steps for enhancing detection include the use of forensic experts and open-ended questions. The fight against fraud is focusing on technology, data analytics, and improved training. Wang further highlighted that transparency, collaboration, and proactive risk assessment are vital for building a more fraud-resilient future. The CAQ is encouraging organizations to continuously assess risks and adopt innovative deterrence and detection strategies.
FASB materials reprinted with permission. Copyright 2025 by Financial Accounting Foundation, Norwalk, Connecticut. Copyright 1974-1980 by American Institute of Certified Public Accountants.
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Read about FDIC annual risk review; SEC swears in new chair; PCAOB holds Investor Advisory Group meeting; and more.
Read about OCC, FDIC removing reputation risk from exams; regulators on rescinding 2023 CRA rule; SEC ending climate disclosure rule defense; and more
Read about FDIC & NCUA Q4 industry data; FDIC board actions including on brokered deposits, change in control, and corporate governance; and more.
Read about FDIC annual risk review; SEC swears in new chair; PCAOB holds Investor Advisory Group meeting; and more.
Read about OCC, FDIC removing reputation risk from exams; regulators on rescinding 2023 CRA rule; SEC ending climate disclosure rule defense; and more
Read about FDIC & NCUA Q4 industry data; FDIC board actions including on brokered deposits, change in control, and corporate governance; and more.