Audit committees revealing more information
Washington, D.C. — Audit committees are providing company investors with more information about their oversight of auditing firms, according to a new report.
The annual “Audit Committee Transparency Barometer,” released in early November by the Center for Audit Quality and Audit Analytics, found that 40 percent of S&P 500 companies now disclose their considerations in appointing their auditing firm (an increase from 13 percent in 2014), versus 27 percent of mid-cap companies (up from 10 percent in 2014) and 19 percent of small-cap companies (up from 8 percent in 2014). The report examines the S&P 500 (large-cap companies), the S&P Midcap 400 and the S&P Smallcap 600. In addition, 46 percent of S&P 500 companies disclose the criteria they consider when evaluating an audit firm (an increase from 8 percent in 2014), versus 36 percent of mid-cap companies (up from 7 percent in 2014) and 32 percent of small-cap companies (up from 15 percent in 2014).
The researchers also found that 26 percent of S&P 500 companies disclose that the evaluation of the external auditor is at least an annual event (an increase from 4 percent in 2014), as opposed to 17 percent of mid-cap companies (up from 3 percent in 2014) and 12 percent of small-cap companies (up from 4 percent in 2014).
The disclosure of an “explicit statement that the audit committee is responsible for appointment, compensation and oversight of external auditor” actually doubled from 44 percent in 2012 to 88 percent in 2018. Disclosure of a “statement that [the] audit committee [is] involved in lead partner selection” increased from 0 percent in 2012 to 78 percent in 2018. The “disclosure of factors used in audit committee’s assessment of the external auditor qualifications and work quality” increased in 2018 to 62 percent, up from 18 percent in 2012.