The WSJ reported yesterday that SEC is considering toughening certain aspects of their 2010 conflict minerals proposal. The statements made in the article corroborate information provided to Elm last week by reliable sources.
If the final rule passes as the article indicates and as we have been told, the official Conflict Minerals Report (CMR) audits will be conducted as Attestation Engagements and only by CPAs. The proposed rule stated that SEC and GAO felt that the audits could be done as Performance Audits, allowing EHS auditors to do those. That sentiment was also clear during the SEC’s Roundtable in October.
However, we understand that SEC stands ready to finalize their determination that CMR audits must be filed rather than furnished, making the audits part of the Form 10-K and other SEC forms. If the CMR audits were to be “furnished” as the proposed rule indicated, there would be more flexibility in who could be considered appropriate auditors.
One implication of this decision is that the credibility of information relied upon in due diligence processes – including any of the nice supporting audits listed in the recent GAO report – will be heavily scrutinized before CPAs and company senior management sign off on the CMR audits. We have commented on this matter many times in the past.
Of course, the specifics of the final requirements will be known only when they are passed and published.