Companies continue to increase transparency of external audit oversight

More companies are providing investors and other stakeholders with information about audit committee oversight of external auditors, according to the latest edition of the Audit Committee Transparency Barometer, an annual report released Wednesday by the Center for Audit Quality (CAQ) and Audit Analytics.

“For the fourth year in a row, audit committees have continued to enhance transparency around their oversight of the external auditor by voluntarily and broadly increasing disclosure,” Cindy Fornelli, executive director of the CAQ, said in a press release. The CAQ is affiliated with the American Institute of CPAs.

The barometer found that 37% of S&P 500 companies’ proxy statements included enhanced discussions of the factors audit committees considered in recommending the appointment of the external audit firm. That’s up from 31% in 2016 and 13% in 2014.

The analysis, which also looks at mid-cap and small-call companies in the S&P Composite 1500, found that 24% of S&P MidCap 400 companies and 17% of S&P SmallCap 600 companies provided enhanced discussion of audit committee considerations in choosing an audit firm. Those percentages are up from 10% and 8%, respectively, in 2014.

The percentage of companies disclosing the evaluation or supervision of the audit firm rose in all three size categories: S&P 500 companies (38%, up from 8% in 2014); S&P MidCap 400 companies (28%, up from 7% in 2014); and S&P SmallCap 600 companies (27%, up from 15% in 2014). 

Jeff Drew (Jeff.Drew@aicpa-cima.com) is a CGMA Magazine senior editor.