TheCorporateCounsel.net

December 19, 2022

Audit Committee Disclosure: Areas for Improvement

The Center for Audit Quality & Audit Analytics are out with the 9th annual “Audit Committee Transparency Barometer.” The report gauges audit committee disclosure of external audit committee oversight activities in the S&P 1500 – broken down by trends in the S&P 500, S&P MidCap 400 and S&P SmallCap 600.

This year’s report shows an uptick in many key areas – including info about the audit committee’s role in cyber risk oversight and ESG oversight:

– 54% of the S&P 500 audit committees reported having responsibility for cyber risk oversight, an 8% increase since 2021

– For S&P 500 companies, 39% of audit committees disclosed having an ESG or sustainability expert on the board, while 18% of audit committees disclosed responsibility of oversight of ESG

That said, there are also opportunities for improvement when it comes to transparency – specifically, around the audit committee’s decision process for external auditor engagements. The CAQ’s press release highlights these stats:

– While 71% of audit committees of S&P 500 companies disclose auditor tenure in the proxy statement, only 9% of such audit committees disclose how the audit committee considers length of auditor tenure when re-appointing the external auditor

– While 51% of audit committees of S&P 500 companies disclose that they are involved in the selection of the audit engagement partner, few disclosed what their involvement in the selection of the audit engagement partner entails

Liz Dunshee