By Cydney Posner
This article in the WSJ, "Audit Committees Urged to Be More Transparent," reports on efforts by the National Association of Corporate Directors, Center for Audit Quality and Association of Audit Committee Members, among others, to urge audit committees to become more transparent about their efforts in hiring and overseeing the work of corporate auditors. These organizations seem to believe that there is a growing trend for audit committees to provide more information of this type and, if there isn't, there should be.
Among the details the groups are seeking are "factors considered when selecting or reappointing an audit firm, information related to negotiating auditor fees, and particulars about how the committee oversees and evaluates the work of their auditor…." A study this year by EY "showed just under one-third of the 100 largest U.S. companies are now voluntarily disclosing the length of their auditor's tenure and about 17% provide extra information about how they selected the lead auditor."
The article reports that investors also want more information from the auditors about the audit. The PCAOB is proposing a rule "next month" that would require the audit report to include the name of the lead audit partner as well as information about firms with which auditors subcontract to help perform the audit. The PCAOB has also proposed that auditors disclose "critical audit matters," rather than just provide a pass/fail audit report. According to the article, the PCAOB is encouraging "audit committees to discuss hypothetical ‘critical audit matters' with their auditors this year in advance of formal rule proposals…." (See my articles of of 8/13/13, 8/14/13, 8/19/13, and 8/28/13.)