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Financial Reporting and Regulatory Update

Fourth Quarter 2018

From the CAQ

Emerging technologies tool for audit committees

On Dec. 12, 2018, the CAQ released a new tool, “Emerging Technologies: An Oversight Tool for Audit Committees," that highlights artificial intelligence and robotic process automation. According to the CAQ, the tool “provides a framework and questions that audit committees may ask management and auditors to help inform their oversight of financial reporting as emerging technologies take hold.”

Critical audit matters: Lessons learned from dry runs

The CAQ released a publication, “Critical Audit Matters: Lessons Learned, Questions to Consider, and an Illustrative Example,” on Dec. 10, 2018, offering initial observations from applying the new PCAOB guidance related to CAMs. Included are lessons learned from the dry runs of applying the CAMs guidance related to:

  • The determination of which matters are CAMs
  • Auditor communication with management and the audit committee
  • Planning and timing of implementation
  • Challenges in drafting CAMs

It also offers 10 questions for audit committees to consider related to including CAMs in the auditor’s report as well as an illustrative example of a CAM disclosure.

Audit committee transparency barometer report

On Nov. 1, 2018, the CAQ and Audit Analytics jointly issued their fifth annual report, “2018 Audit Committee Transparency Barometer.” The report shows an increase from 2014 (the first year these barometer reports were issued) in the percent of public company audit committees disclosing the following in proxy statements:

  • Considerations in appointing the audit firm
  • Length of audit firm engagement
  • Criteria considered when evaluating the audit firm
  • That the audit committee is involved in audit partner selection
  • That the evaluation of the external auditor is at least an annual event

The report also presents examples of public company disclosures to illustrate best practices.