Bad news: You missed the deadline in filing your annual report. Good news: You’re far from alone, and experts shared tips with CFO Brew on how to handle the many challenges that may impede your progress on finishing that vital Form 10-K.
This spring, Intelligize reported a roughly 40% increase in companies that announced they would be tardy in filing their Form 10-K compared to 2023.
Ro Sokhi, partner at UHY, attributed the surge in late filings to a few factors:
- A boom in SPACs and IPOs in 2021 and 2022 meant that accounting departments found themselves doing more and different work for a now-public company compared to when they were private.
- Regulators, namely the Public Company Accounting Oversight Board (PCAOB) and Securities and Exchange Commission (SEC), are ramping up pressure on accounting departments to “increase the quality of their internal controls [and] increase the quality of our audit procedures.”
- On top of it all, the profession is seeing a talent shortage, as more baby boomers retire and fewer young folks seem interested in accounting.
“All of that just created a perfect storm to cause these late filings,” he told CFO Brew.
PCAOB has been busy this year. In May, it adopted both a new auditing standard that was meant to clarify existing standards into a single document along with a quality control update that included new processes, programs, and reporting. Then in June, PCAOB updated regulations on technology-assisted audits and tightened a rule on auditor liability.
“It’s a labor-intensive push on some of those [updates],” especially for companies that have gone through major changes such as an acquisition or merger, Amy Gallagher, managing director of UHY Consulting, told CFO Brew. “Just finding all of the information to be able to get clarity around that is a lot of work.”
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Among short-staffed accounting teams, the SEC reporting deadline “consistently comes up as some fire drill,” Gallagher said. Companies such as Tupperware have cited a lack of accounting staff when announcing they would be late in filing their annual reports.
What’s a CFO to do? There are some actions organizations can take to make due and hopefully avoid delayed filings, according to the UHY experts.
While it may sound simple, there’s benefit to having all filing deadlines and upcoming major events—say, an acquisition or a divestiture—all on one calendar, Sokhi said. Visualizing what’s on the horizon can help ensure accounting teams devote enough time to get things done while potentially having bandwidth for “the unknown.”
Sokhi laid out all the paperwork deadlines, both scheduled and a surprise, a company may encounter: “There are three 10-Qs, if you’re a US public filer, and then there’s one 10-K annual filing. But…if there’s a significant acquisition, you may need to file financial statements of the acquisition on an 8-K. If you have a cybersecurity event that’s a material breach, as soon as the company’s determined it’s a material breach, you have four days within which you have to file it on an 8-K.”
Of course, there’s only so much one accounting team can handle, especially if they’re not at full strength. Companies should have relationships with outside firms to quickly add staffing and resources in order to meet deadlines, Gallagher said.
“Some of the companies that we work with, the really small companies or [those] that just went public, they have tiny accounting departments,” she said. “They have one person that they depend on for SEC reporting, and that’s just not enough capacity for anybody to be successful. So, I would say certainly having your partners [is important].”