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CAQ Snapshot: December 2014

Friday, December 19, 2014

CAQ, Audit Analytics Release Findings from New Audit Committee Transparency Barometer

The Center for Audit Quality (CAQ), together with Audit Analytics, released findings from an extensive analysis of 2014 audit committee disclosures in proxy statements, measuring the robustness of these disclosures among S&P Composite 1500 companies. Public disclosures are the primary channel through which audit committees can inform and educate investors and other stakeholders about their critical responsibilities, and demonstrate their effectiveness in executing those responsibilities.

The Audit Committee Transparency Barometer measures the content of proxy statement disclosures in certain key areas, including auditor oversight and audit committee scope of duties. “We think it is important to provide a baseline for audit committee disclosures, with the intent of tracking trends and leading practices on an annual basis moving forward,” said CAQ Executive Director Cindy Fornelli in a statement. “Greater transparency about the audit committee’s roles and responsibilities provides an opportunity to communicate more clearly to shareholders about one of its key responsibilities, auditor oversight, which in turn may enhance audit quality.”

The Barometer builds on the CAQ’s work with the Audit Committee Collaboration, notably its 2013 report, Enhancing the Audit Committee Report: A Call to Action.

New CAQ Alert Highlights Key Risk Areas for 2014 Audit Cycle

To help public company auditing firms address risks in a proactive and accelerated manner, the CAQ published a member alert, “Select Auditing Considerations for the 2014 Audit Cycle.” Intended to remind member firms of certain auditing considerations that may be relevant for the 2014 audit cycle, the alert identifies and discusses some of the more judgmental or complex audit areas, including those that have recently been the subject of attention and focus by regulators. Among these topics are revenue recognition, going concern, and internal control over financial reporting (ICFR). 

The CAQ will update this alert annually as a part of the profession’s commitment to a continuous cycle of improvement.

CAQ Requests Academic Research Proposals on Key Auditing Issues

The CAQ issued a request for proposals (RFP) to fund independent academic research on auditing-related topics. The RFP focuses on a number of critical policy issues that are priorities for the CAQ and the public company auditing profession, including audits of ICFR, audit quality indicators, audit committee effectiveness, communication and information technology, financial reporting fraud, professional skepticism, and value of the audit.

This marks the seventh year that the CAQ will award grants for independent, scholarly academic research on topics of interest to the profession. In 2008, the CAQ established a Research Advisory Board (RAB), comprised of representatives from academia and the profession. Thus far, the RAB has awarded 25 grants for independent academic research projects on several topics of interest to the profession.

“These projects are very important to the CAQ and to the public company auditing profession because they have the potential to advance the field of public company auditing and to provide useful information that could enhance audit quality,” said the CAQ’s Fornelli in a statement.

The CAQ also has produced a brief video that offers expert guidance and advice on how to develop a successful research proposal, which might be of benefit to applicants. The video examines how to identify a good research question, where to find a good research question, and the tools for executing a successful proposal. 

Fornelli: How Public Company Auditors Chase Perfection, Catch Excellence 

Staying proactive and working toward effective, operational regulation are among the key ways the public company auditing profession is continuously improving, said the CAQ’s Fornelli in remarks before the AICPA’s Conference on Current SEC and PCAOB Developments in Washington, DC on December 8.

“We [in the public company auditing profession] never assume our own perfection, yet we chase it constantly,” said Fornelli. “We strive to improve for the sake of investors but also for the companies in which they invest, as well as for our markets, the economy, and the public at large.”

In addition to providing a survey of data trends related to public company reporting and auditing, Fornelli briefed the conference on key initiatives undertaken by the profession, including its development of audit quality indicators, its field-testing of the Public Company Accounting Oversight Board’s 2013 proposal on updating the auditor’s report, and efforts to enhance financial disclosure.

CAQ Welcomes Kevin Lavin as Professional Fellow

Kevin Lavin, CPA, has joined the CAQ as a Professional Practice Fellow. Formerly a senior manager in the Professional Practice group of the Assurance Services practice of Ernst & Young LLP in New York, NY, Lavin will help guide the CAQ’s professional practice and public policy activities during his 18-month fellowship.

Lavin has 10 years of auditing and accounting experience, including serving assurance clients in the media and entertainment industry. He is the sixth participant in the CAQ’s professional practice fellowship program, which is conducted in partnership with the CAQ’s member firms. Lavin succeeds Susan Brooke of KPMG, who will return to that firm as a senior manager in the audit practice in early 2015.

Register Now: Webcast on Building a Fraud-Resistant Organization

On January 8, 2015, the Anti-Fraud Collaboration will host a webcast to discuss its new report, The Fraud-Resistant Organization: Tools, Traits, and Techniques to Deter and Detect Financial Reporting Fraud. A panel of top experts will address the three central themes of the report—strong “tone at the top,” skepticism, and robust communications—and explain how financial supply chain participants can incorporate these important techniques into their respective roles. Register for the webcast here.

CAQ and Millstein Center to Host Discussion on Transparent and Effective Disclosure

Prominent speakers from the financial, public, legal, and academic sectors will gather on January 22, 2015 for a discussion on effective financial disclosure. Hosted by the CAQ and Columbia Law School’s Ira M. Millstein Center for Global Markets and Corporate Ownership, the half-day program will cover the SEC’s Disclosure Effectiveness project, as well as the strengths, challenges, and impact of mandated and voluntary disclosure.

At the event, the CAQ’s Fornelli will moderate a panel featuring Catherine Dixon, Partner in the Public Company Advisory Group at Weil Gotshal & Manges; Zach Oleksiuk, CFA, Head of Americas Corporate Governance and Responsible Investment, BlackRock; Tom Quaadman, Vice President at the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness; and Neila Radin, Senior Vice President and Associate General Counsel at JPMorgan Chase. Agenda and registration information are available on the Millstein Center website.