The jointly-released CAQ/Audit Analytics: “Audit Committee Transparency Barometer” (online here) reveals these (among other) upticks in voluntary audit committee disclosure practices and associated examples of effective disclosure based on S&P 1500 proxy statements filed from July 1, 2020 - June 30, 2021:
Cybersecurity oversight. Still relatively newer to the annual disclosure tracking compared to other more traditional disclosures is the topic of cybersecurity oversight. These findings illustrate the dramatic increases in disclosure:
- 46%, 34%, and 24% of S&P 500, S&P MidCap, and S&P SmallCap companies, respectively, disclosed in their 2021 proxies the audit committee's responsibility for cyber risk oversight - up from 11%, 5%, and 4%, respectively, in 2016.
- 34%, 22%, and 12% of S&P 500, S&P MidCap, and S&P SmallCap companies, respectively, disclosed in their 2021 proxies whether the board has a cyber expert - up from 7%, 4%, and 3%, respectively, in 2016.
- 32%, 22%, and 12% of S&P 500, S&P MidCap, and S&P SmallCap companies, respectively, disclosed in their 2021 proxies the committees on which the cyber expert serves, up from 7%, 4%, and 3%, respectively, in 2016.
See the sample disclosures on pages 22-24.
Audit committee's considerations in (re)appointing the external auditor. 44%, 31%, and 24% of S&P 500, S&P MidCap, and S&P SmallCap companies, respectively, disclosed in their 2021 proxies the audit committee's considerations in (re)appointing the external auditor, up from 13%, 10%, and 8%, respectively, in 2014. See the sample disclosures on pages 14-17.
Criteria considered in auditor evaluation. 52%, 39%, and 35% of S&P 500, S&P MidCap, and S&P SmallCap companies, respectively, discussed criteria the audit committee considered in its evaluation of the audit firm, up from 8%, 7%, and 15%, respectively, in 2014. See the sample disclosure on pages 20-21.
Frequency of evaluation. 32%, 20%, and 17% of S&P 500, S&P MidCap, and S&P SmallCap companies, respectively, disclosed that the evaluation of the external auditor is conducted at least annually (best practice), up from 4%, 3%, and 4%, respectively, in 2014.
Additional sample disclosures in Appendix II include audit firm compensation and audit partner selection.
See this Journal of Accountancy article and numerous additional resources on our Audit Committees and Annual Meeting/Proxy Statement pages.
This post first appeared in the weekly Society Alert!