July 2025 Financial Reporting, Governance, and Risk Management

SEC files response to court request on climate disclosure rules 

On July 23, 2025, the SEC responded to an April 2025 8th U.S. Circuit Court of Appeals request for information on whether the SEC intended to review or reconsider its climate-related disclosure rules. The request followed the SEC’s March 2025 decision to discontinue its defense of related litigation challenging those rules. In its July 2025 filing, the SEC asked the court to proceed with the litigation and to decide the case. The SEC also indicated the court’s decision would inform the SEC’s future action on the rules. Commissioner Caroline Crenshaw provided a related statement.

SEC updates Financial Reporting Manual

On July 2, 2025, the Division of Corporation Finance (CorpFin) announced updates to the Financial Reporting Manual to reflect amendments to the SEC’s disclosure rules. The update incorporates changes to Regulation S-X Acquisition Rules 3-05, 3-14, 8-04, and 8-06, which now consolidate into Section 2900. Additional revisions were made to reflect the 2020 amendments to Rules 3-10 and 3-16 relating to financial disclosures for guaranteed securities.

CorpFin noted that the current update does not include revisions related to other rulemakings, including those on the qualifications of accountants, management’s discussion and analysis, selected financial data, supplementary financial information, special purpose acquisition companies, shell companies, and projections.

SEC holds executive compensation disclosure roundtable

On June 26, 2025, the SEC hosted a roundtable to discuss executive compensation disclosure. Chair Paul Atkins and commissioners Hester Peirce and Mark Uyeda emphasized that disclosure requirements should prioritize material, decision-useful information for investors. Crenshaw added that rules should promote transparency, comparability, and investor focus while being regularly assessed for materiality, cost, and alignment with long-term value creation.

SEC hosts DeFi regulation roundtable

On June 9, 2025, the SEC hosted a roundtable on decentralized finance (DeFi), featuring remarks from Atkins and commissioners Peirce, Crenshaw, and Uyeda. Atkins and Uyeda emphasized the need for regulatory frameworks that address risk while enabling innovation. Peirce noted that DeFi code is protected under the First Amendment, though individuals operating platforms that facilitate securities transactions may still fall within the SEC’s jurisdiction. Crenshaw cautioned that DeFi must be grounded in clear investor protections.

SEC commissioner comments on tokenized securities

On July 9, 2025, Peirce issued a statement reflecting on the evolving conversation around tokenized securities. She noted that while blockchain technology may enhance capital formation and collateral efficiency, the core legal and regulatory principles remain unchanged and must guide innovation in this space. Peirce encouraged market participants to engage proactively with staff when developing tokenization models.

CorpFin issues guidance on disclosures for crypto asset ETPs

On July 1, 2025, CorpFin issued a statement outlining key disclosure considerations for crypto asset exchange-traded products (ETPs). The guidance emphasizes the importance of providing clear and comprehensive disclosures related to ETPs such as custody arrangements, net asset value calculation methodologies, risk factors, and other material aspects of the offering.

SEC publishes data on broker-dealers, M&A activity, and BDCs

On June 26, 2025, the SEC’s Division of Economic and Risk Analysis released updated data on broker-dealers, merger and acquisition (M&A) activity, and business development companies (BDCs). The report highlights continued consolidation among broker-dealers and provides insights into regulatory and registration trends for M&A advisers and BDCs.

SEC extends daily reserve computation rule compliance date

On June 25, 2025, the SEC extended the compliance date to June 30, 2026, from Dec. 31, 2025, for amendments requiring certain broker-dealers to perform daily customer reserve computations. Atkins stated the extension is intended to provide firms adequate time to implement and test operational changes without undue burden.

SEC committee continues to discuss Regulation A

The SEC’s Small Business Capital Formation Advisory Committee met on July 22, 2025, to finalize its review of Regulation A and examine the regulatory framework for “finders.” The meeting also focused on potential enhancements to support small business capital formation, particularly for founders operating outside traditional capital hubs.

PCAOB Chair Erica Williams departs

On July 15, 2025, Erica Williams, PCAOB chair since January 2022, announced her departure as of July 22, 2025. During her tenure, Williams led the PCAOB in finalizing seven projects addressing 24 rules and standards, enhancing enforcement efforts with record-breaking penalties, and improving international audit oversight – most notably by gaining historic access to inspect and investigate firms in China. The PCAOB described this period as one of record accomplishments in advancing investor protection and audit quality.

SEC names George Botic as PCAOB acting chair

On July 21, 2025, the SEC announced the designation of George Botic to serve as acting chair. Botic became a PCAOB board member on Oct. 25, 2023. Prior to joining the board, he was the director of the PCAOB’s Division of Registration and Inspections.

SEC chair calls for PCAOB candidates 

On July 23, 2025, SEC Chair Paul Atkins announced he is soliciting candidates for all five PCAOB positions, including the chair. Applications are due Aug. 25, 2025. 

PCAOB addresses engagement acceptance

The PCAOB on July 7, 2025, published “Audit Focus: Engagement Acceptance,” outlining key considerations and good practices for auditors evaluating whether to accept a new engagement. While intended for audit firms, the publication is equally relevant for executives and audit committees who play a vital role in ensuring a successful auditor selection and onboarding process.

Key points for consideration include:

• Engagement risk evaluation. Firms must assess management integrity, prior restatements or control issues, and their own independence and qualifications before accepting an engagement.
• Auditor transition. Successor auditors should conduct detailed inquiries with predecessor auditors in accordance with AS 2610, “Initial Audits – Communications Between Predecessor and Successor Auditors,” including any audit difficulties, disagreements, or compliance issues.
• Governance awareness. Audit committees should be prepared to discuss management changes, governance effectiveness, and any known issues from prior audits.
• Good practices observed. Use of workload scorecards for partners, preengagement risk templates, and firm policies to decline engagements lacking industry expertise.

Executives and audit committees can use this publication as a guide to strengthen their own readiness and transparency during auditor selection, ultimately supporting improved audit quality and risk mitigation.

AICPA proposes control objectives for stablecoin framework

On June 12, 2025, the AICPA issued an exposure draft: “Proposed Criteria for Controls Supporting Token Operations: Specific to Asset-Backed Fiat-Pegged Tokens.” This draft introduces a dual framework designed to enhance transparency, consistency, and assurance in the reporting of stablecoin operations. The first part outlines presentation and disclosure criteria, requiring detailed reporting on redeemable token quantities, redemption asset composition, and the comparison between the two. These criteria aim to address the current lack of standardization across issuers, improve stakeholder confidence, and support regulatory oversight.

The second part proposes control objectives across eight key areas, establishing a foundational framework for assessing the design and effectiveness of controls over stablecoin operations. The objectives address the following areas: token generation and management, client onboarding and maintenance, customer transaction processing, key and backup management, redemption asset management, vendor management, reporting, and IT general controls. Illustrative disclosures and implementation guidance are also provided to support practical application, while aligning with emerging regulatory expectations.

Comments are due Aug. 11, 2025.

CAQ shares survey results on use of AI

On June 16, 2025, the CAQ published the results of the institutional investor survey conducted by KRC Research during May 2025, which focused on the use of AI in the audit process and the use of generative AI (GenAI) within portfolio companies. Overwhelmingly, investors expressed strong confidence in AI’s ability to enhance audit accuracy, efficiency, and risk assessment, with 90% believing it increases trust in audit results. Top benefits include improved error reduction, data analysis speed, and fraud detection. However, investors underscored the need for structured safeguards: The most critical measures cited were regular audits of AI systems, clearly defined usage policies, and transparency about AI applications. Concerns persist on data privacy, lack of human oversight, and insufficient regulatory clarity.

When considering GenAI in portfolio companies, institutional investors said they remain optimistic but cautious. Nearly all surveyed expressed confidence in companies’ ability to manage AI-related risks, though data protection and cybersecurity top their list of concerns. While over half consider current federal regulations to be clear and comprehensive, a notable minority believe gaps remain. Investors prioritize proactive governance, including regular risk assessments and formal AI policies, as essential to responsible AI use.

CAQ updates S&P 500 sustainability reporting analysis

The CAQ’s “S&P 500 Sustainability Reporting and Assurance Analysis,” which examines sustainability disclosures and third-party assurance practices among S&P 500 companies, was updated in June 2025, reflecting its latest findings for the fiscal yearend 2023 reporting period. The CAQ reported that S&P 500 companies continue to embrace sustainability reporting as 99% disclosed ESG/sustainability information in 2023 (up slightly from 98% in 2022), with 73% of those obtaining third-party assurance for some of their data, up from 70% the prior year. Most companies had auditors check greenhouse gas emissions and one to three additional sustainability metrics. Specifically, 24% of companies relied on public company auditors (up from 21%), and 94% of those engaged the same firm that audits their financials.