The SEC Filing Review Process: A Survey and Future Research Opportunities*

Abstract

As part of its goal to monitor and enhance the quality of information available to investors, the SEC reviews companies' filings to ensure compliance with applicable financial reporting and disclosure requirements. Increased public interest and the substantial costs for both the SEC in reviewing and the companies in responding have led to a rapidly growing body of accounting literature that examines the filing review process. We survey and comment on 80 published and unpublished academic research papers in this literature and identify significant gaps that future research should address. We also summarize the institutional features of the filing review process, aiming to inform future academic studies. Our survey should be of interest to both academics and market participants evaluating the effectiveness and efficiency of the filing review process.

Does Financial Statement Comparability Facilitate SEC Oversight?*

“…Under section 408 of the Sarbanes‐Oxley Act of 2002 (SOX), 2 the SEC is required to review firms' periodic filings at least once every three years. Cunningham and Leidner (2022) document, however, that the SEC does so more often, reviewing nearly half of the firms in any given year. The DCF selectively reviews filings based on specific criteria identified in SOX as well as any other criteria the SEC determines to be important 3 .…”

“…The SEC sends comment letters about various issues, including those that do not constitute serious accounting violations requiring restatements (Johnston and Petacchi 2017; Cassell et al 2013; Cunningham and Leidner 2022). If a firm's accounting deviations, regardless of severity, become more noticeable when compared to those of its peers that have similar accounting systems, then higher financial statement comparability might lead to an overall increase in comment letter issuance with no corresponding increase in the discovery of serious accounting issues.…”

“…Highlighting how valuable the information from peers with higher financial statement comparability is to the regulatory filing process, we find that cross‐firm comparable accounting numbers enhance the SEC's ability to identify accounting deviations suggestive of poor accounting quality. In doing so, this study addresses the call for more research about conditions that influence the efficacy of the SEC's filing review process (Cunningham and Leidner 2022). Prior studies examine whether the overall quality of the SEC's oversight is adversely affected by various external constraints such as geographic distance (Kedia and Rajgopal 2011), seasonally compressed periodic filings (Gunny and Hermis 2020), and an influx of IPO and acquisition transitional filings (Ege et al 2020).…”

Regulatory Oversight and Reporting Quality: Evidence from SEC Office Assignment Change

“…Regulatory oversight is an important mechanism that has a deterrence effect and influences firms' reporting decisions. (Cunningham and Leidner 2022). This review is done by filing review offices at the DCF, where the offices are organized by industry.…”

“…See a recent review about studies on the SEC filing review process inCunningham and Leidner (2022) 13 It is not easy to define post-period if there is more than one change. Also, the sample size of firms that experiences more than one change is small.…”