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AICPA, CalCPA request more clarity on California climate rules

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The American Institute of CPAs and the California Society of CPAs sent a joint comment letter to the California Air Resources Board asking for changes in the state’s climate risk disclosure rules.

With the SEC apparently reversing course on the proposed climate disclosure rule from the Biden administration by pausing litigation over it while facing multiple lawsuits, California’s climate disclosure laws are among the few in the U.S. mandating companies report on greenhouse gas emissions and climate-related financial risks.

In December, the California Air Resources Board solicited feedback to help shape regulations for the state’s upcoming Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act. The AICPA and CalCPA responded to CARB’s questions in the information solicitation and pointed out areas where more clarity would be needed to ensure CPAs can effectively support a practical and efficient climate disclosure framework.

“Transparency and accountability in sustainability reporting and assurance are crucial for building stakeholder trust and meeting market and public expectations,” said the comment letter. “To strengthen confidence in reported information, we encourage legislators and regulators to incorporate recognized sustainability reporting and assurance standards, which already outline different levels of assurance, and establish uniform requirements for assurance practitioners.”

The AICPA and CalCPA suggested CARB to consider:

  • Providing clear guidance implementation and compliance in the first year. “CARB should update its rulemaking timeline, clarify how it will address statutory deadlines if rulemaking is delayed, and provide implementation guidance on reporting and clarity on assurance requirements for the first reporting cycle,” said the letter.
  • Broadening acceptable reporting standards. Allow climate-related disclosures introduced by the International Financial Reporting Standards Foundation to be accepted as recognized reporting standards under the California rules, both for simplicity and to ensure consistency and comparability among entities. The IFRS Foundation oversees the International Sustainability Standards Board, which has issued standards on climate-related disclosures and sustainability reporting.
  • Aligning assurance standards with recognized terminology. “The use of non-standard terms can create confusion for practitioners, preparers and report users, making it harder to apply standards correctly.,” said the comment letter. “AICPA assurance standards guide CPAs in assurance engagements, which are subject to ongoing monitoring and quality control.”
  • Setting rigorous minimum qualifications for assurance practitioners. Qualifications  for independence, competency, ethics, oversight and quality management should be at least as rigorous as those followed by CPAs when assuring financial and nonfinancial information, the AICPA and CalCPA recommended.

The two organizations formed a climate-disclosure working group after California’s legislation was enacted in 2023 to review implementation and compliance issues. Along with informing the comment letter to CARB, several of the issues and recommendations addressed by that working group are discussed in a joint paper from the AICPA and the Center for Audit Quality.

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Accounting

Acting IRS commissioner reportedly replaced

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Gary Shapley, who was named only days ago as the acting commissioner of the Internal Revenue Service, is reportedly being replaced by Deputy Treasury Secretary Michael Faulkender amid a power struggle between Treasury Secretary Scott Bessent and Elon Musk.

The New York Times reported that Bessent was outraged that Shapley was named to head the IRS without his knowledge or approval and complained to President Trump about it. Shapley was installed as acting commissioner on Tuesday, only to be ousted on Friday. He first gained prominence as an IRS Criminal Investigation special agent and whistleblower who testified in 2023 before the House Oversight Committee that then-President Joe Biden’s son Hunter received preferential treatment during a tax-evasion investigation, and he and another special agent had been removed from the investigation after complaining to their supervisors in 2022. He was promoted last month to senior advisor to Bessent and made deputy chief of IRS Criminal Investigation. Shapley is expected to remain now as a senior official at IRS Criminal Investigation, according to the Wall Street Journal. The IRS and the Treasury Department press offices did not immediately respond to requests for comment.

Faulkender was confirmed last month as deputy secretary at the Treasury Department and formerly worked during the first Trump administration at the Treasury on the Paycheck Protection Program before leaving to teach finance at the University of Maryland.

Faulkender will be the fifth head of the IRS this year. Former IRS commissioner Danny Werfel departed in January, on Inauguration Day, after Trump announced in December he planned to name former Congressman Billy Long, R-Missouri, as the next IRS commissioner, even though Werfel’s term wasn’t scheduled to end until November 2027. The Senate has not yet scheduled a confirmation hearing for Long, amid questions from Senate Democrats about his work promoting the Employee Retention Credit and so-called “tribal tax credits.” The job of acting commissioner has since been filled by Douglas O’Donnell, who was deputy commissioner under Werfel. However, O’Donnell abruptly retired as the IRS came under pressure to lay off thousands of employees and share access to confidential taxpayer data. He was replaced by IRS chief operating officer Melanie Krause, who resigned last week after coming under similar pressure to provide taxpayer data to immigration authorities and employees of the Musk-led U.S. DOGE Service. 

Krause had planned to depart later this month under the deferred resignation program at the IRS, under which approximately 22,000 IRS employees have accepted the voluntary buyout offers. But Musk reportedly pushed to have Shapley installed on Tuesday, according to the Times, and he remained working in the commissioner’s office as recently as Friday morning. Meanwhile, plans are underway for further reductions in the IRS workforce of up to 40%, according to the Federal News Network, taking the IRS from approximately 102,000 employees at the beginning of the year to around 60,000 to 70,000 employees.

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Accounting

On the move: EY names San Antonio office MP

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Carr, Riggs & Ingram appoints CFO and chief legal officer; TSCPA hosts accounting bootcamp; and more news from across the profession.

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Accounting

Tech news: Certinia announces spring release

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Certinia announces spring release; Intuit acquires tech and experts from fintech Deserve; Paystand launches feature to navigate tariffs; and other accounting tech news and updates.

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