Data shows double-digit growth in the percentage of S&P 500 companies disclosing information in several key areas of external auditor oversight
Washington, DC – The second edition of the Audit Committee Transparency Barometer, an annual report issued jointly by Audit Analytics and the Center for Audit Quality (CAQ), identifies encouraging trends in 2015 with respect to voluntary, enhanced disclosure around external auditor oversight, an important facet of the audit committee’s broader financial reporting oversight role.
In 2014, the CAQ and Audit Analytics, undertook their initial effort to gauge how public company audit committees approach the public communication of their oversight activities, by measuring 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 second edition of the Barometer provides a year-over-year comparison in key audit committee disclosure areas. Among other findings, the Barometer shows the following:
- One-quarter of S&P 500 companies show enhanced discussion of the audit committee’s considerations in recommending the appointment of the audit firm, up from 13 percent in 2014.
- Sixteen percent of S&P 500 companies explicitly stated the role audit committees play in determining the audit firm’s compensation, doubling from 8 percent in 2014.
- Disclosure of the criteria considered when evaluating the audit firm more than tripled among S&P MidCap 400 companies, rising from 7 percent to 25 percent. Disclosure of this criteria among S&P SmallCap 600 companies increased from 15 percent to 22 percent.
These and other Barometer data suggest that audit committees are responding to an increasing interest by investors, regulators, and other stakeholders in the roles and responsibilities of audit committees by providing the marketplace with meaningful information about their role in external auditor oversight. The Barometer also offers some examples of leading disclosure practices that show audit committees are also tailoring these enhanced disclosures specifically to the company, and not using a one-size-fits-all approach.
“These efforts by audit committees to enhance their disclosures are encouraging, given the importance of meaningful, tailored information for investors and other stakeholders,” said Cindy Fornelli, executive director of the Center for Audit Quality. “By tracking this data and providing examples, the Barometer can provide fresh perspective to companies as they assess their approach to these disclosures in coming proxy seasons.”
“Year two of the Barometer has shown that audit committee disclosure is becoming more meaningful,” said Mark Cheffers, CEO of Audit Analytics.” We hope that the disclosure intelligence we are providing through this research will continue to aid in measuring this improvement and providing insight to investors.”
Both the CAQ and Audit Analytics look forward to future readings of the Audit Committee Transparency Barometer to gauge further enhancement in audit committee disclosures.
Erica Hurtt, firstname.lastname@example.org, (202) 591-2601
Joe Cyr, email@example.com, (774) 728-3230
About the CAQ
The Center for Audit Quality (CAQ) is an autonomous, nonpartisan 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 Audit Analytics®
Audit Analytics is an independent research provider that enables the accounting, legal and investment communities to analyze auditor market intelligence, public company disclosure trends and risk indicators. For more information please e-mail firstname.lastname@example.org or call 508-476-7007.