Information on External Auditors on the Rise: Center for Audit Quality

The amount of information available to investors and other stakeholders on audit committee oversight of the external auditor continues to increase, according to the fifth edition of the “Audit Committee Transparency Barometer,” an annual report issued jointly by the Center for Audit Quality (CAQ) and Audit Analytics.

“The trends revealed in our report tell a clear success story – over the past five years, audit committees have provided increasingly robust disclosures about their important investor-protection role in overseeing the external audit,” says CAQ Executive Director Cindy Fornelli. “Taking steps to enhance transparency into our extraordinary system of financial reporting, as many audit committees are doing, strengthens both the confidence of investors and their ability to make sound decisions in the capital markets. To build on this progress, the CAQ encourages audit committees to explore additional opportunities for transparency improvements.”

Each year since 2014, the report has measured the robustness of proxy disclosures among companies in the S&P Composite 1500. Findings in this year’s report include:

  • 40% of S&P 500 companies disclose considerations in appointing the audit firm (up from 13% in 2014), compared to 27% of mid-cap companies (up from 10% in 2014) and 19% of small-cap companies (up from 8% in 2014).
  • 46% of S&P 500 companies disclose criteria considered when evaluating the audit firm (up from 8% in 2014), compared to 36% of mid-cap companies (up from 7% in 2014) and 32% of small-cap companies (up from 15% in 2014).
  • 26% of S&P 500 companies disclose that the evaluation of the external auditor is at least an annual event (up from 4% in 2014), compared to 17% of mid-cap companies (up from 3% in 2014) and 12% of small-cap companies (up from 4% in 2014).