Investors at CAQ workshop have eyes on non-GAAP disclosures

Investors in a group of about 35 stakeholders taking part in a Center for Audit Quality (CAQ) workshop on the evolving role of the auditor said they are placing a significant focus on non-GAAP disclosures when evaluating their investment decisions.

Disclosures based on US GAAP increasingly are not a primary input to investment decisions, according to the investor feedback described in a report based on a March 12th workshop held in New York.

More than half the workshop participants were investors and buy-side analysts; audit committee members, preparers and auditors also took part in the discussion. The CAQ, which is affiliated with the American Institute of CPAs, held the workshop to get more input from stakeholders in its continuing discussions on auditors’ evolving roles.

The report adds to the growing body of evidence showing an appetite for reliable key performance indicators (KPIs), which includes a report commissioned by the AICPA and the Chartered Institute of Management Accountants earlier this year that discussed management accountants’ role in measuring non-financial value and the human dimension of businesses.

Investors at the CAQ workshop said they want more consistency and comparability from period to period in non-GAAP measures reported by management in management discussion and analysis (MD&A) and earnings releases. They said they prefer to hear about non-GAAP KPIs directly from management, though.

Despite the increasing interest in non-GAAP measures, workshop participants said the earnings release remains an item of keen interest to investors because of its timeliness. A majority of the group said that there should be some level of auditor involvement with the earnings release. A majority also supported a requirement that the auditor read the earnings release and discuss the contents with the audit committee, a process that’s considered a best practice today.

—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.