Audit committees making more disclosures
Public companies and their audit committees are revealing far more about their auditing firms, audit fees and audit partners this year, according to a new report from Ernst & Young.
The EY Center for Board Matters released a report last week, “What audit committees are reporting to shareholders in 2019,” about the types of information about the audit now available more frequently to investors, beyond the disclosures required by laws or regulations, and how disclosures have increased dramatically since EY began examining them in 2012.
Many investors and regulators contend that increased transparency regarding the audit committee’s oversight process boosts investor confidence and that rigorous oversight of public company audits by independent audit committees helps protect investors.
EY CBM measured the trend by reviewing proxy statements from Fortune 100 companies to compare audit-related disclosures from 2012-2019 to get a clear overview of recent trends.
It found that 80 percent of companies disclosed that the audit committee is involved in selecting the lead audit partner. None of the companies made that disclosure in 2012.
Meanwhile, 90 percent of companies disclosed that the audit committee considers non-audit fees and services when assessing auditor independence, compared to only 16 percent in 2012.
Nearly two-thirds (64 percent) of companies disclose the factors used in the audit committee’s assessment of the outside auditor’s qualifications and work quality, which is four times the 16 percent that did so in 2012.
Two-thirds of companies said they consider the impact of changing auditors when deciding whether to retain the current external auditor, and 78 percent disclose the tenure of the current auditor. That’s up from just 3 percent and 23 percent, respectively, in 2012.