In August, EY released Let’s Talk Governance – Audit Committee Reporting to Shareholders 2014 Proxy Season Update. The key acknowledgement from the report was that Audit Committees are becoming much more transparent. The study reviewed 80 of the Fortune 100 companies (based on companies that had filed proxy statements for at least three years).
Most of the improvements related to how the Audit Committee manages the quality and costs associated with the external audit firms. Key points from the report include:
- Approximately 15% of the companies provide direct links to the Audit Committee Charter. This more than doubles the number of companies providing links the year before.
- 65% of the companies acknowledged the Audit Committee’s responsibility to select and oversee the external auditor. Nearly half indicated they evaluate the engagement partner assignment.
- Nearly 1/3 of the companies disclosed their rationale for selecting the external auditor.
- Half of the companies disclosed the tenure of the external auditor.
This definitely provides food for thought and is something all Chief Audit Executives should share with their Audit Committee to ensure they consider the broader aspects of how this affects your company.