Paul Munter has served as the SEC’s acting chief accountant for the past year, but that temporary post hasn’t stopped him from pursuing arguably the most aggressive agenda in decades of accounting and financial oversight. auditing American companies, leaving a lasting mark on financial reporting.
Munter has so far provided the first concrete guidance on how to account for digital assets and pushed for investor-focused accounting standards. He warned audit firms against threats to their independence. And just three months into his job, he issued accounting guidelines for special purpose acquisition companies that halted the SPAC boom.
“He had the interpretation that launched a thousand restatements,” said accounting analyst Jack Ciesielski. “It reacts to what exists.”
The Chief Accountant position at the Securities and Exchange Commission plays a key role in guiding companies on how to apply accounting rules while overseeing the work of two independent auditing and accounting standard setters.
“It’s the most important and high-profile accounting work in the world,” said Dennis Beresford, former chairman of the Financial Accounting Standards Board, one of two independent bodies overseen by the SEC. Few people are qualified for it, he said, and those who are — qualified academics or partners in auditing firms — may not want to leave hard-earned positions to take up government jobs. .
The top accountant job at the Wall Street regulator remains one of the few executive positions still awaiting a permanent head since Chairman Gary Gensler joined the commission in April 2021.
Since assuming his acting role in February 2021, Munter has served what amounts to a 14-month audition for the permanent position. It’s unclear how long he might stay or when Gensler might fill the role. The SEC declined to comment on staff decisions and declined to make Munter available for interview.
But he shared how he thinks about his role, in public remarks last week at Baruch College’s financial reporting conference, noting that the office’s priorities are “anchored” on the committee’s agenda.
“From when I wake up in the morning until I go to bed at night, I try to think about what we can do to improve the decision-usefulness of the information investors receive,” Munter said.
Munter joined the Office of the Chief Accountant in 2019 from KPMG LLP, where he was a partner in the firm’s national office. But he is best known as an academic, previously chairing the accounting department at the University of Miami in the 1990s and more recently teaching at the University of Colorado, according to his LinkedIn profile. Prior to assuming the role of Acting Chief Accountant, he led the commission’s international accounting work.
“He’s a real change from the chief accountants we’ve had over the last 10 years maybe. And I think it’s for the best,” Ciesielski said.
Former chief accountants generally came from the larger accounting firms, such as KPMG. Few came from academia.
John C. “Sandy” Burton, a former professor and dean of Columbia Business School, is remembered as the last academic to hold this position, and that was in the 1970s. current market values versus historical costs, against a backdrop of runaway inflation over this decade.
Munter’s active program mirrors Gensler’s priorities and sits midway between Burton’s “revolutionary” tenure and that of typical chief accountants, many of whom were “placeholders,” said Tom Selling, consultant and former researcher at the Chief Accountant’s Office.
“I think the chairman, Gensler, is doing Munter a disservice by having him serve as acting chief accountant for a full year,” Selling said. “He is as qualified as anyone else to be the chief accountant.”
Yet Munter has the same authority as a permanent appointee and has given advice through statements and speeches that have already reshaped the practice.
“Especially given his background, his scholarship and his work at a very large accounting firm, I don’t think it matters that he ‘acted’ behind his name,” said Sarah Williams, assistant professor in law at Penn State University, who has worked for various financial regulators, including the SEC and the Public Company Accounting Oversight Board.
Munter’s hands-on oversight of business accounting has met with resistance, including from one of his bosses.
Commissioner Hester Peirce, the SEC’s only Republican and outspoken critic of Gensler’s policies, called the SEC’s approach to crypto accounting “dispersion” and questioned why the commission would issue such specific instructions to a “very limited number” of companies without giving them a chance to weigh in first.
SPAC sponsors and their advisers wondered how repeated mass restatements to correct technical accounting errors were helping investors. An April 2021 statement from Munter sparked a paperwork crush for blank check companies and chilled the hot SPAC market.
Munter pushed back against some of the criticism, saying claims that investors don’t care about accounting errors weren’t a valid reason to correct those errors quietly without restating the results entirely. True to his position, he later suggested that auditors and their corporate clients were biased in how they treated restatements.
Audit firms have not been left out of Munter’s already busy schedule and have been chided for their burgeoning advisory arms. He warned that these lucrative practices could threaten companies’ ability to provide independent audits.
Munter likely played a key role in crafting the rules needed to implement a 2020 law targeting audits of Chinese companies. That was no small feat, after Gensler’s overhaul of the leadership of the Public Company Accounting Oversight Board left it short of members and without a permanent chair, Williams said.
“He stepped into this breach to ensure that the PCAOB continued to do what it needed to do from a standards-setting perspective while still working in close coordination with the SEC,” she said. declared.
He also helped advise the commission in developing climate disclosure rules, which would require companies to detail the financial impact of extreme weather events or capital investments. Munter last week defended the SEC’s proposal that calls for climate-related accounting footnotes, saying the commission has for decades set policy on the form and content of financial statements, and that the rules would be based on existing accounting standards. The proposal also calls for certain information on greenhouse gas emissions to be audited.
Munter also warned the independent accounting standard setter, the FASB, urging it to prioritize projects that would benefit investors, in a public statement that also urged the FASB to get to work on climate and digital asset rules. Weeks after calling the FASB to task, Munter’s office issued a staff bulletin stating that certain cryptocurrencies held by customers should be reported on company balance sheets.
The cryptographic guidelines were an example of how aggressive Munter was in both overseeing the FASB and responding to market demands, Selling said. “You can’t take 10 years to decide how crypto should be accounted for.”