Reflecting an ongoing trend toward increased voluntary disclosure about the audit committee's practices and accountability, EY's latest report: "What audit committee are reporting to shareholders in 2019" reveals these (among other) dramatic improvements in voluntary disclosure based on an analysis of Fortune 100 proxy statements filed since 2012:
- In 2019, 64% of companies disclosed the factors considered by the audit committee when assessing the external auditor's qualifications and work quality - up from 16% in 2012.
- 80% of companies disclosed that the audit committee was involved in the selection of the lead audit partner, compared to 0% in 2012.
- Nearly 90% of companies disclosed that the audit committee considers non-audit fees and services when assessing auditor independence, compared to just 16% in 2012.
- Nearly 40% of companies stated that the audit committee is responsible for fee negotiations with the auditor - up from 1% in 2012.
The graphics on page 3 of the report detail results by year. In addition, the report includes sample instructive disclosures on several key topics including factors used in auditor assessments and the audit committee's consideration of alternatives to retaining the current auditor, and notes new auditor disclosure requirements that may trigger companies' additional voluntary disclosure.
EY poses several questions for audit committees to consider that are worth deliberation in the context of their commonly expanding oversight responsibilities that may include ERM, cybersecurity, and other topics; increasing investor expectations; and new regulatory requirements (e.g., CAMs, new accounting standards). Among them: Consider whether your proxy disclosure is keeping pace with the audit committee's evolving role. Benchmarking other companies' disclosures is a good way to remain informed about how your company's voluntary disclosures stack up to peer companies.
See also our recent report: "Audit Committee Disclosure Trends" and additional information & resources on our Audit Committees page. This post first appeared in the weekly Society Alert!