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Financial Reporting and Regulatory Update

Fourth Quarter 2019

From the CAQ

Auditors’ role in company-prepared information

On Dec. 3, 2019, the CAQ published “The Role of Auditors in Company-Prepared Information: Present and Future” to help stakeholders understand the current role of auditors in various types of company-prepared and publicly disclosed information. The document addresses how auditors can play a greater role in strengthening the reliability of decision-useful information published outside the audited financial statements.

Proposal request for auditing-related research

On Nov. 14, 2019, the CAQ issued its annual request for proposals to fund independent academic research on projects of interest to the auditing profession. Topics of interest for 2020 include corporate disclosures of nonfinancial information and non-GAAP measures.

The request also identifies several topics of continued interest including:

  • Critical audit matters
  • Innovative technologies
  • Materiality
  • Professional skepticism
  • Auditing accounting estimates and fair value measurements
  • Audits of internal control over financial reporting
  • Auditor risk assessments
  • Fraudulent financial reporting
  • Boards’ and audit committees’ effectiveness

Proposals should be submitted through the online submission form and are due March 16, 2020.

Audit committee transparency barometer report

On Nov. 6, 2019, the CAQ and Audit Analytics issued the 2019 issue of the “Audit Committee Transparency Barometer,” which tracks S&P Composite 1500 proxy disclosures to evaluate transparency regarding audit committee oversight of the   external auditor and other important financial reporting topics.

This edition reports that although there has been steady growth in the amount of information provided in audit committee disclosures, there are still significant opportunities to increase transparency. The most growth was shown in the disclosure areas of information on cybersecurity risk oversight, nonaudit services, and length of auditor tenure. Audit committees can improve transparency in areas of discussion between the audit committee and external auditor, auditor evaluation, and engagement partner selection and compensation.

The publication also provides disclosure examples.