Companies Increasing Audit Committee Transparency

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The majority of audit committees at Fortune 100 companies are disclosing more information than in years past, especially about their assessment of their outside auditing firm, according to a new report.

The report, from Ernst & Young, examined Fortune 100 companies in 2014 that filed proxy statements for three consecutive years as of August 15, a total of 80 companies.

The report found that 65 percent of the reviewed companies specified that the audit committee is responsible for the appointment, compensation and oversight of the auditor, compared to 40 percent in 2012. In addition, 31 percent of the reviewed companies explained the rationale for appointing their auditor, including the factors used in assessing the auditor’s quality and qualifications, compared to 16 percent in 2012. Forty-six percent of the reviewed companies observed that the selection of the auditor is in the best interests of the company and/or shareholders, compared to 4 percent in 2012.

EY also found that audit committees are centralizing their disclosures. Audit-related disclosures increasingly are consolidated in an “audit-related” section of the proxy statement or placed in the audit committee report.

Some companies are also improving the accessibility of the audit committee charter. Nearly 15 percent of companies provided a direct link to the audit committee charter, making it easier for investors to learn about the committee’s designated responsibilities.

“The enhanced disclosures many audit committees are choosing to make afford investors and other key stakeholders greater insight and confidence in the important oversight work audit committees are undertaking to execute their responsibilities,” said Allie Rutherford, director of corporate governance at the EY Center for Board Matters, in a statement. “For example, audit committees are providing more information on their assessment of companies’ external auditors.”

To access the report, click here.

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