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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.

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