Joint Reports: Audit committee responsibilities, disclosures continue to expand

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According to the Center for Audit Quality (CAQ) and Audit Analytics‘ “Audit Committee Transparency Barometer,” audit committees are increasingly including disclosures about several key areas of oversight within public company proxy statements. The results of the 9th annual report reflect a long-term positive trend of increased transparency in several areas by audit committee members.

The CAQ report found several positive disclosure trends among the S&P 500. Among them, cybersecurity disclosures continue to increase year-over-year, consistent with expectations as cybersecurity threats grow. Fifty-four percent of the S&P 500 audit committees reported having responsibility for cyber risk oversight, an eight-percentage point increase since 2021.

Given the rise in environmental, social and governance (ESG) reporting, the report also for the first time tracked disclosure of audit committee oversight related to ESG. For S&P 500 companies, 39% of audit committees disclosed having an ESG or sustainability expert on the board, while 18% of audit committees disclosed responsibility for oversight of ESG.

The report also identifies areas where audit committees can provide more tailored disclosures. While 71% of audit committees of S&P 500 companies disclose auditor tenure in the proxy statement, only 9% of such audit committees disclose how the audit committee considers length of auditor tenure when re-appointing the external auditor.

And while 51% of audit committees of S&P 500 companies disclose that they are involved in the selection of the audit engagement partner, few disclosed what  their involvement in the selection of the audit engagement partner entails.

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