Public cos. increase audit committee disclosures
Companies are continuing to increase the level of audit committee disclosures in their proxy statements, according to a new report from the Center for Audit Quality and Audit Analytics.
The 2020 Audit Committee Transparency Barometer found that disclosures related to the audit committee’s responsibility for cybersecurity risk oversight is leading the disclosure trend, increasing fourfold over the past five years from 11 percent in 2016 to 39 percent for S&P 500 companies in 2020. The CAQ is calling on public companies and their audit committees to accelerate the trend toward greater transparency and give an appropriate level of detail in audit committee disclosures.
Some examples of new disclosures tracked in the Audit Committee Transparency Barometer this year include critical audit matters and COVID-19. Other disclosure areas have been on the increase this year, including disclosures of non-audit services (84 percent of S&P 500 companies) and the criteria considered when evaluating the audit firm (51 percent of S&P 500 companies).
“Transparency around audit committee oversight contributes to the orderly operations of capital markets,” said CAQ executive director Julie Bell Lindsay in a statement Monday. “We urge public companies and their audit committees to accelerate the trend towards increasing transparency and provide an appropriate level of detail in audit committee disclosures to give investors additional confidence in the key oversight role these committees play in company-reported financial information.”
However, some types of audit committee disclosures are decreasing. For instance, the percentage of S&P 500 companies disclosing a statement that the audit committee is responsible for fee negotiations dipped from 19 to 18 percent.
The report includes excerpts of proxy disclosures from several companies, including United Airlines, Citigroup, Electronic Arts, Momenta Pharmaceuticals and Exelon, to demonstrate positive examples of strong disclosures.