2017 External Auditor Assessment Tool Now Available for Audit Committees
The Center for Audit Quality (CAQ), in partnership with the Audit Committee Collaboration, has 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.
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.
Updates in this edition of the tool relate to upcoming changes in accounting rules and standards and other potential risk areas.
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.
“Since its debut in 2012, the External Auditor Assessment Tool has become a valued resource for audit committees,” said CAQ Executive Director Cindy Fornelli in a statement. “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.”
“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,” added 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.”
New Video Vignette: "Auditing Is a People Business"
The CAQ has added to its series of "video vignettes" for use in the classroom. These videos provide insights into the types of conversations that occur in the audit process, highlighting communications and interviewing techniques, professional skepticism, and how to navigate conversations on difficult and sensitive issues.
In the new vignette, "Auditing Is a People Business," the (hypothetical) audit team has identified a potential error in the income statement. On Monday evening, the engagement team realized that the income statement analytic showed a decrease in marketing expenses for the quarter and the year. However, the engagement team’s expectation was that the company would have an increase in marketing expenses due to additional spending. The company’s earnings call is scheduled for Thursday morning, and the senior manager wants to get the issue resolved well before then. The video illustrates two different approaches that the audit team could employ, each ending in a very different way.
AICPA Publishes Criteria to Evaluate and Report on Cybersecurity
As the discussion around cybersecurity has grown, so has the auditing profession’s engagement with key stakeholders in the capital markets. In April, the American Institute of CPAs (AICPA) released two sets of criteria to support a new cybersecurity reporting framework that is designed to meet the needs of a broad range of stakeholders for useful information about an entity’s cybersecurity risk management efforts. The ultimate intent of the reporting framework is to support a voluntary, examination-level cybersecurity attestation engagement that results in a CPA’s opinion.
In May 2017, the AICPA will provide CPAs with guidance on how to perform and report on cybersecurity examination engagements in accordance with the AICPA attestation standards. Also, stay tuned for a forthcoming publication from the CAQ on the nature of today’s cybersecurity risks, the role auditors currently play related to cybersecurity, and how that role can evolve to the benefit of senior management, boards of directors and other pertinent stakeholders.
NACD CEO Gleason Appears on "Profession in Focus"
Episode 44 of "Profession in Focus" features NACD President and CEO Peter Gleason. Gleason discusses the top issues facing corporate boards, including implications of global economic uncertainty, the ever-present threat of industry disruption, and the evolving challenge of cybersecurity.
Gleason also offers insights on the phenomenon of "short-termism" and how directors can work to align short-term and long-term objectives. "Is your CEO an advocate for the long-term in terms of how they are positioning the strategy with the employees of the company and the shareholders?" Gleason asks. "That communication aspect is so critical."
Video: CAQ's Catherine Ide Talks Non-GAAP Measures, PCAOB Standards
When used appropriately, non-GAAP financial information can provide useful insights about companies, says Catherine Ide, CAQ Senior Director of Professional Practice, in an interview with the National Association of Real Estate Investment Trusts (NAREIT). Ide notes that the CAQ has released a publication calling for a conversation among the financial reporting supply chain regarding the preparation, presentation, and use of these measures. “We believe the auditing profession is uniquely positioned to foster this dialogue because we have a lens into many facets of those stakeholders in this process,” Ide says.
In her conversation with NAREIT, Ide also discusses a few key matters on the agenda for the Public Company Accounting Oversight Board, including its proposal to update the auditor's report and its ongoing implementation of the final rule on disclosure of certain audit participants.
Fornelli on Lessons Learned from 10 Years of Advocacy
The importance of the big picture, the value of working together, the power of good information: These are a few key lessons learned over 10 years of CAQ advocacy, writes Cindy Fornelli in an April LinkedIn Influencers post. She discusses the CAQ's efforts in several important policy developments that have unfolded over the past decade, including the debate over fair value accounting, the legal challenge to the PCAOB, the fight against financial reporting fraud, and the ongoing discussion around enhancing the auditor's report.
The latter issue, Fornelli says, showcases the value of reinforcing advocacy positions with robust data and information. She points in particular to the profession's extensive field-testing of proposals from regulators to change the auditor's report. "When it comes to getting people's attention and effecting meaningful change," she writes, "I'll take good information over a loud voice any day."
Join the CAQ at These Upcoming Events
Women Corporate Directors Global Institute
The CAQ is pleased to partner with Women Corporate Directors for the 2017 Global Institute, where Cindy Fornelli will moderate a May 11 discussion on “The Visionary Board at Work: Developing a Culture of Leadership.” Fornelli will be joined by Fatima Al Jaber, Board Member and Head of Projects Committee at the Al Jaber Group; Marina Brogi, Director of Luxottica Group and Salini Impregilo; Aliza Knox, Vice President of Twitter APAC; and Rebecca Thornton, Consultant for the Board of Directors Practice at Spencer Stuart.
May 10-11, 2017; New York, NY (Website)
California Society of CPAs Accounting Principles and Auditing Standards Committee Meeting
We look forward to seeing our accounting and auditing colleagues at the California Society of CPAs AP&AS Committee Meeting, where Catherine Ide, CAQ Senior Director of Professional Practice, will give an update on the auditing profession and the CAQ.
May 18, 2017; San Francisco, CA (Website)
Teachers of Accounting at Two Year Colleges Conference
On May 20, Cindy Fornelli will highlight the Discover Audit initiative at the 2017 TACTYC Conference and moderate a panel on “Inspiring Your Students to Discover a Career in Auditing” with Catherine Banks, Director, Ernst & Young Foundation and Academic Resource Center; Robyn Barrett, Chair of Business & Accounting at St. Louis Community College; and Stephanie Tyler, National Director of Campus Recruiting at BDO USA.
May 18-20, 2017; Austin, TX (Website)
CReCER Regional Conference
Cindy Fornelli will moderate a panel at the 10th Annual CReCER Regional Conference on Accounting and Auditing for Regional Economic Growth. Her panel, “Fostering Trust: The Role and Tools of the Profession,” will feature Stavros Thomadakis, Chairman of the International Ethics Standards Board for Accountants; José Raúl González Lima, Director of Corporate Financial Reporting at the Grupo Televisa S.A.B; Ana Maria Elorrieta, retired PwC Partner and former IFAC Board Member; Mercedes de Freitas, Board Member at Transparency International; and Idesio Coelho, President of IBRACON, Board Member at IFAC and South America Regulatory Matters and Brazil Risk Management Leader at Ernst & Young.
June 6-9, 2017; Mexico City, Mexico (Website)
National Association of Colleges and Employers Conference
The CAQ is looking forward to the 2017 NACE Conference in Las Vegas! Stop by booth #503 to learn more about the new resources on our DiscoverAudit.org website and why auditing is an exciting and fulfilling career that students should consider.
June 6-9, 2017; Las Vegas, NV (Website)
National Association of Corporate Directors Cyber Summit
The CAQ is pleased to partner with the NACD for its 2017 Cyber Summit, where Cindy Fornelli will participate in a discussion on contextualizing cybersecurity risk. Registration is now open!
June 21, 2017; Chicago, IL (Website)