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Overview

In our seventh year of analyzing disclosures of audit committee oversight in proxy statements of companies in the S&P Composite 1500 (S&P 1500), the 2020 Barometer shows encouraging long-term trends across topics such as Audit Firm Evaluation and Supervision. We also see positive trends in disclosure of risk oversight in emerging areas such as Cybersecurity, COVID-19 and the discussion of Critical Audit Matters (CAMs). We are pleased to highlight numerous examples from this year’s population of proxy statements.

Increasing disclosures build investor confidence in capital markets, and companies can take action to accelerate the trend. The information in disclosures is particularly helpful to investors now as they seek additional information about audit committee oversight of public company financials during the uncertainty of the pandemic.

Our 2019 Audit Committee Transparency Barometer identified certain areas of concern and opportunities to enhance transparency. In particular, discussion of audit fees and its connection to audit quality (Question 3), how the audit committee considers auditor compensation (Question 4), and disclosure of significant areas of discussion with the auditor (Question 10) remain low in 2020 and we call on audit committees to consider ways to increase such disclosure.

W A T C H

Profession in Focus | Audit Committee Transparency: Progress and Opportunities

Get a high level overview of the Audit Committee Transparency Barometer from the CAQ's Vanessa Teitelbaum, CPA,Senior Director of Professional Practice, and Matt Sickmiller, CPA, Senior Manager of Professional Practice. Teitelbaum and Sickmiller discuss how and why the CAQ has worked with Audit Analytics to track trends in audit committee disclosure, as well as opportunities to enhance this disclosure that are highlighted in the Barometer.

Methodology

Consistent with the methodology used in prior years, we reviewed S&P 1500 proxy statements filed in the period from July 1, 2019, through June 30, 2020. This index comprises the S&P 500 large-cap companies (S&P 500), the S&P MidCap 400 (S&P MidCap), and the S&P SmallCap 600 (S&P SmallCap). Each edition of the annual Audit Committee Transparency Barometer tracks the companies that are included in the S&P indices at the end of the filing period. For purposes of presenting our findings, we analyzed disclosures located in the audit committee report or elsewhere in the proxy. In certain instances, the disclosure was duplicated in other sections of the proxy statement.

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About the Center for Audit Quality

The Center for Audit Quality (CAQ) is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high-quality performance by public company auditors; convenes and collaborates with other stakeholders to advance the discussion of critical issues that require action and intervention; and advocates policies and standards that promote public company auditors’ objectivity, effectiveness, and responsiveness to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs. For more information, visit www.thecaq.org.

About Audit Analytics

Audit Analytics is an independent research provider that enables the accounting, legal, and investment communities to analyze auditor market intelligence, public company disclosure trends, and risk indicators. For more information, email info@auditanalytics.com or call 508-476-7007.

Please note that this publication is intended as general information and should not be relied on as being definitive or all-inclusive. As with all other CAQ resources, this publication is not authoritative, and readers are urged to refer to relevant rules and standards. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The CAQ makes no representations, warranties, or guarantees about, and assumes no responsibility for, the content or application of the material contained herein. The CAQ expressly disclaims all liability for any damages arising out of the use of, reference to, or reliance on this material. This publication does not represent an official position of the CAQ, its board, or its members.