November 1, 2017

2017 Audit Committee Transparency Barometer

An annual report issued jointly by the Center for Audit Quality and Audit Analytics, the Audit Committee Transparency Barometer shows that audit committees have continued to enhance transparency around their oversight of the external auditor by voluntarily and broadly increasing disclosure. With robust data and real-world examples of effective proxy disclosures, the Barometer is a resource for companies looking to better communicate with investors, regulators, and the public.

Each year since 2014, the Barometer has measured the robustness of proxy disclosures among companies in the S&P Composite 1500. This index is comprised of the S&P 500 (large-cap companies), the S&P MidCap 400, and the S&P SmallCap 600.

The fourth edition of the Barometer provides year-over-year comparisons of key audit committee disclosure areas. Notable findings include:

  • Thirty-seven percent of S&P 500 companies' proxy statements present enhanced discussion of the audit committee's considerations in recommending the appointment of the audit firm, up from 13 percent in 2014.
  • Twenty-four percent of mid-cap companies show enhanced discussion of the audit committee's considerations in recommending the appointment of the audit firm (up from 10 percent in 2014) compared to 17 percent of small-cap companies (up from 8 percent in 2014).
  • Thirty-eight percent of S&P 500 companies disclose criteria considered when evaluating the audit firm, a jump from 8 percent in 2014.
  • Twenty-eight percent of mid-cap companies disclose criteria considered when evaluating the audit firm (up from 7 percent in 2014) compared to 27 percent of small-cap companies (up from 15 percent in 2014).

The 2017 Barometer highlights an opportunity for audit committees to enhance transparency regarding the disclosure of whether the evaluation of the external auditor is at least an annual event.