Washington, DC – The Center for Audit Quality (CAQ), in partnership with the Audit Committee Collaboration, released an updated version of its External Auditor Assessment Tool, which is designed to assist audit committees in carrying out their responsibilities of appointing, overseeing, and determining compensation for the external auditor.
“Since its debut in 2012, the External Auditor Assessment Tool has become a valued resource for audit committees,” said CAQ Executive Director Cindy Fornelli. “We are pleased to update the tool as part of the public company auditing profession's drive to enhance audit quality, to strengthen investor confidence, and to promote effective corporate governance.”
While acknowledging that the evaluation of the external auditor should consider the unique attributes of each company, the tool provides a general framework to assist audit committees. It contains sample questions to help committees in three specific areas:
• Quality of services and sufficiency of resources provided by the auditor;
• Quality of communication and interaction with the auditor; and
• Auditor’s independence, objectivity, and professional skepticism.
“Oversight of risk, strategy development, and financial communications are all critical components of boards’ duties that help to ensure long-term, sustainable performance of the business,” said Peter Gleason, president and CEO of the National Association of Corporate Directors (NACD), a member of the Collaboration. “NACD was proud to be a part of the CAQ-led effort to support audit committees in their important work.”
The tool also includes a sample form and rating scale for obtaining input from company personnel about the external auditor, along with other resources for audit committees and others charged with corporate governance.
Updates in this edition of the tool relate to upcoming changes in accounting rules and standards and other potential risk areas, such as:
(1) new revenue recognition, leasing and credit losses standards that take effect over the next few years;
(2) new and proposed PCAOB standards, including Form AP and proposed updates to the auditor’s reporting model.
As a companion to the tool, the CAQ has produced a new video that brings this resource to life through interviews with leading audit committee chairs discussing the importance of the assessment process, as well as how they put the tool to work.
“We used the CAQ's questions and we put them to not just the audit committee in a dialogue, but also in a questionnaire form to the CFO, the internal audit controller,” says Catherine Lego, former audit committee chair at SanDisk, in the video. “We graded the firm and then reviewed it with the outgoing partner to see what was his reaction to where they were strong and where they could improve.”
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About the CAQ
The Center for Audit Quality is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high quality performance by public company auditors, convenes and collaborates with other stakeholders to advance the discussion of critical issues requiring action and intervention, and advocates policies and standards that promote public company auditors’ objectivity, effectiveness, and responsiveness to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs. For more information, visit www.thecaq.org.
About the Collaboration
The Audit Committee Collaboration is a partnership of nationally recognized U.S. corporate governance and policy organizations. The organizations came together in 2012 to collaborate on projects intended to leverage their individual efforts to expand audit committee member access to useful tools and materials across the spectrum of public companies in order to strengthen audit committee performance and transparency. For more information, visit auditcommitteecollaboration.org/.