Advancing audit quality
In 2012, several nationally recognized U.S. governance organizations came together to collaborate on projects intended to leverage their efforts to expand audit committee member access to useful tools and materials across the spectrum of public companies to strengthen audit committee performance and transparency. Known as the Audit Committee Collaboration, one of the first projects was the production of a tool for assisting audit committees with their annual assessment of the external auditor.
An area of recent focus has been audit committee reporting. The Audit Committee Collaboration believes that greater transparency about the audit committee’s roles and responsibilities is one way of increasing investor confidence, and an opportunity to communicate more clearly to shareholders about audit committee-related activities. To this end, public company audit committee reporting can and should be strengthened, and the Collaboration encourages all public company audit committees to renew their focus on this important issue.
Published by the CAQ in partnership with the Audit Committee Collaboration, the External Auditor Assessment Tool is designed to assist audit committees in carrying out their responsibilities of appointing, overseeing, and determining compensation for the external auditor. The tool contains sample questions to help committees in three specific areas:
Quality of services and sufficiency of resources provided by the auditor;
Quality of communication and interaction with the auditor; and
Auditor’s independence, objectivity, and professional skepticism.
The tool also includes a sample form and rating scale for obtaining input from company personnel about the external auditor, as well as resources for additional reading that can benefit audit committees and others charged with governance.
Updates in the 2017 edition include considerations related to changes in accounting standards and potential risk areas, such implementation of the new revenue recognition standard, use of non-GAAP financial information, and ongoing cybersecurity concerns.