CAQ Snapshot: November 2015
Wednesday, November 25, 2015
Audit Committee Transparency Barometer Reveals Encouraging Disclosure Trends
Together with partner Audit Analytics, the Center for Audit Quality (CAQ) in November released the second edition of the Audit Committee Transparency Barometer. The 2015 Barometer identifies encouraging trends 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 an 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 efforts by audit committees to enhance their disclosures are encouraging, given the importance of meaningful, tailored information for investors and other stakeholders,” said CAQ Executive Director Cindy Fornelli in a statement. “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.”
CAQ Issues Request for Auditing-Related Academic Research Proposals
The CAQ in November issued its annual request for proposals(RFP) to fund independent academic research on projects of interest to the auditing profession. 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 internal control over financial reporting, auditing of accounting estimates and fair value, corporate social responsibility reporting, audit quality indicators, audit committee effectiveness, data analytics, professional skepticism, fraudulent financial reporting, and value of the audit.
The CAQ and the public company auditing profession are dedicated to supporting valuable academic research that can have important real world impact on audit quality and the future of auditing. This marks the eighth year that the CAQ will award grants for independent, scholarly academic research on topics of interest to the profession. The CAQ’s Research Advisory Board (RAB), comprised of representatives from academia and the profession, has awarded 28 grants for independent academic research projects.
To be considered, proposals should be received by Friday, March 18, 2016. Applicants must submit their proposals following the instructions on the CAQ’s online submission form. Proposals will be reviewed by the RAB, and grants will be announced no later than May 31, 2016.
“Profession in Focus” Features Deloitte & Touche LLP CEO Ucuzoglu
Sound regulation helps to strengthen the public company auditing profession, says Deloitte & Touche LLP Chairman and Chief Executive Officer Joseph Ucuzoglu in a November edition of “Profession in Focus.”
“We have a constructive relationship with [regulators],” observes Ucuzoglu, whose own career path includes serving as Senior Advisor to the Chief Accountant at the Securities & Exchange Commission. “We value their feedback. We learn from it, and we take the learnings to get better at what we do.”
In addition to the role of regulation, Ucuzoglu discusses in the interview how technology helps attract talent to the profession, as well as his career advice. The interview, along with previous editions of “Profession in Focus,” can be found on the CAQ’s website and at its YouTube channel.
Fornelli Appointed to ICGN Accounting and Auditing Committee
CAQ Executive Director Cindy Fornelli has been appointed to the Accounting and Auditing Committee of the International Corporate Governance Network (ICGN). Established in 1995 as an investor-led organization, ICGN’s mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide. The objective of ICGN’s Accounting and Audit Committee is to ensure that corporate and audit reporting meet the needs of investors and are prepared in accordance with high quality standards and assurance.
#AuditorProud Social Media Blitz Will Highlight Opportunities in Auditing
Mark your calendars: From dawn to dusk on December 10, 2015, the CAQ and its members–along with several professional, university, and high school organizations–will lead a social media “blitz” to celebrate and showcase the value of auditors to the economy and the benefits of an auditing career. Using the #AuditorProud hashtag, auditors, academics, and others will share messages, pictures, and stories on Facebook, Instagram, LinkedIn, and Twitter about why they chose auditing, what they enjoy about working in the profession, and what a career in auditing can offer. Be sure to follow the #AuditorProud conversation online on December 10!