In a strongly worded letter, the U.S. Chamber of Commerce urged the Securities and Exchange Commission to turn thumbs down on a proposal that would require auditors to disclose their biggest concerns in their audits of public companies.

If the SEC approves the Public Company Accounting Oversight Board’s proposed standard revising auditor reporting, that “will lead to the disclosure of immaterial, confidential, and confusing information that will obfuscate disclosures for investors and make capital formation less efficient,” David Hirschmann, the chief executive officer of the Chamber’s Center for Capital Markets Competitiveness, wrote to the SEC on August 11.

Yet the Chamber has been the only organization to date that has written to the commission recommending that it reject the PCAOB’s rule proposal, which was widely expected to pass muster with the SEC. In contrast, while audit firm BDO has concerns that auditor reporting of “critical audit matters” (CAMs) under the rule might spawn lawsuits against auditors, the firm implicitly accepted the rule in an August 15 letter to the SEC.

BDO is the only major accounting firm to have written the SEC, while the Council of Institutional Investors and a number of asset managers have written letters urging the commission to approve the measure promptly.

Given the Trump administration’s anti-regulatory disposition, however, the Chamber’s request might get a warmer response than anticipated. Indeed, in a major policy speech on July 12, SEC chair Jay Clayton seemed to express criticism of the amount of financial disclosure rules. On the other hand, he has expressed support for the PCAOB itself.

In his letter, the Chamber’s Hirschmann was especially critical of the PCAOB’s call for CAM disclosures. In particular, the standard would require auditors to include in the auditor’s report a discussion of CAMs arising from the audit of the current period’s financials.

A CAM is any matter communicated or required to be communicated to the audit committee and that both relates to material accounts or disclosures that are material to the financial statements and involves “especially challenging, subjective, or complex auditor judgment.”

Under the proposed rule, the auditor’s report on a company’s financials would have to identify the CAM, describe the main considerations that led the auditor to deem that the matter is a CAM, and describe how the audit addressed the CAM in the audit.

Among the Chamber’s main objections to the proposed rule is that although it would require material disclosures, the disclosure of CAMs could include a great deal of immaterial information. Another objection is that in complying with the rule, “auditors may disclose original (confidential) information that would not otherwise be made public by the company,” according to Hirschmann’s letter.

Further, the proposed standard “undermines the role and responsibilities of auditors,” he wrote. For instance, corporate  management, not the auditor, “is the source of original information about the company.”

For their part, the responsibility of auditors is to render an opinion on whether the reporting by management is in conformity with GAAP. By requiring auditors to report what under state laws only management is required to report, the PCAOB’s rule would place “both auditors and management in an untenable position that may lead to conflict of legal obligations and increased liability,” according to Hirschmann.

Further, the standard would put “the PCAOB in the position of being a defacto regulator of financial reporting and disclosures, which exceeds the PCAOB’s authority and represents a fatal flaw with the proposed standard,” he wrote.

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