Nov 09, 2015
From the Financial Reporting View
The Center for Audit Quality (CAQ) and Audit Analytics recently released their second annual report, Audit Committee Transparency Barometer, which identifies positive trends in voluntary, enhanced disclosures about external auditor oversight. The Transparency Report gauges the transparency of disclosures about audit committee activities based on the robustness of proxy disclosures by companies in the S&P Composite 1500. This index comprises the S&P 500, the S&P MidCap 400, and the S&P SmallCap 600.
The comparative findings for the 2014 and 2015 disclosures about key audit committee activities include:
- One-quarter of the S&P 500 companies enhanced their discussion about the audit committee’s considerations in recommending the appointment of the audit firm, up from 13 percent in 2014;
- Sixteen percent of the S&P 500 companies explicitly stated the role that audit committees play in determining the audit firm’s compensation, doubling from 8 percent in 2014; and
- Twenty-five percent of the S&P MidCap 400 companies disclosed the criteria that they considered when evaluating the audit firm, up from 7 percent in the prior year. Disclosure of these criteria among the S&P SmallCap 600 companies increased from 15 percent to 22 percent.
These findings suggest that audit committees are responding to an increasing interest by investors, regulators, and other stakeholders in the roles and responsibilities of audit committees related to external auditor oversight. The Transparency Report includes excerpts from enhanced disclosures in proxy statements that certain companies developed specifically to meet their circumstances.