Audit Committee Tools For Changes To The Auditor’s Report
On Dec. 6, 2017, the Center for Audit Quality (CAQ) distributed a tool, “The Auditor’s Report: Considerations for Audit Committees,” that public company audit committees can use to understand the changes in and implementation timing of the PCAOB’s new auditing standard, “The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion.”
The first phase of implementation includes disclosure of auditor tenure among other changes, and the second phase includes the most significant change – that is, disclosure of CAMs. For both phases, the CAQ tool identifies the changes to the auditor’s report and provides questions for audit committees to consider as they discuss those changes with auditors and other stakeholders.
Previously, on Oct. 24, 2017, the CAQ issued Alert 2017-06, “The Auditor’s Report – New Requirements for 2017,” which summarizes the PCAOB auditing standard on the revised ARM.
Audit Committee Transparency
The CAQ distributed its fourth annual “Audit Committee Transparency Barometer” report on Nov. 1, 2017. The report includes audit committee disclosure examples, and it shows that since 2014 a larger percentage of public companies are voluntarily including more robust disclosure of their audit committee’s external auditor oversight activities in proxy statements, particularly for the following:
Although the percentage of companies disclosing whether the external auditor is evaluated at least annually has increased, the report highlights this area as one where improvement could be made.
- Considerations in recommending the appointment of the audit firm
- Criteria considered when evaluating the audit firm
- Length of the audit firm engagement
- The audit committee’s responsibility for fee negotiations
- The audit committee’s involvement in selecting the audit engagement partner
- The rotation of the engagement partner every five years