TheCorporateCounsel.net

Liz recently blogged about EY’s 10th annual survey of audit committee disclosures, and now the Center for Audit Quality is out with its 8th annual Audit Committee Transparency Barometer. All of this tracking of audit committee disclosures is indicative of the fact that the audit committee’s role in oversight of financial reporting and the auditors is still very much of interest to investors, including disclosure that goes above and beyond the bare minimum required by the SEC.

CAQ’s analysis focused on disclosures of audit committee oversight in proxy statements of companies in the S&P Composite 1500. Overall, the CAQ observed slight increases with some stagnation among disclosures that have been tracked over the years. The one big exception is cybersecurity – the CAQ indicates that disclosure regarding the audit committee’s oversight of cybersecurity increased by 5 to 7 percentage points among S&P 500 companies each year since 2016.

The most common disclosures that CAQ observed in 2021 continue to be related to non-audit services and potential impact to independence, auditor tenure, criteria considered to evaluate the audit firm and involvement in audit partner selection. Moderate levels of disclosure were observed on the topics of oversight of cybersecurity, engagement partner rotation, considerations when appointing the auditor, and stating the evaluation of the auditor occurs at least annually. The lowest rates of disclosure involve the audit committee’s negotiation of auditor fees, an explanation of changes in auditor fees, consideration of fees in the context of audit quality and disclosure of significant areas addressed with the auditor. The CAQ indicates that these areas present the greatest opportunity for increased transparency by the audit committee.

– Dave Lynn