Financial Reporting and Regulatory Update

Fourth Quarter 2022

From the CAQ

Audit committee transparency report

On Nov. 30, 2022, the CAQ and Audit Analytics issued the “2022 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. New questions added in 2022 address disclosures over the audit committee’s consideration of the length of the auditor tenure, how the audit committee is involved in the selection of audit engagement partner, whether the board of directors has an ESG or sustainability director, and whether the audit committee is responsible for ESG oversight. 

 

In the ninth year of analyzing disclosures of audit committee oversight in proxy statements, the findings of the report note a continued overall uptick in key areas of disclosure. The publication provides a summary of the results of the new questions, highlights of the results, a discussion of the benefits of audit committee disclosures, disclosure examples, and questions to consider when preparing audit committee disclosures. 

On the same day, the CAQ also issued “Audit Committee: The Kitchen Sink of the Board,” which addresses how boards can effectively allocate oversight responsibilities to the audit committee and how audit committee members keep up with an ever-evolving workload and improve their disclosures related to audit committee oversight responsibilities. 

Analysis of S&P 500 ESG reporting

On Oct. 18, 2022, the CAQ issued an analysis of 2020 ESG reports and Carbon Disclosure Project (CDP) Climate Change Questionnaires for S&P 500 companies. The purpose of this analysis was to understand what the companies disclosed about reporting standards and frameworks used, greenhouse gas emissions, assurance or verification of ESG information, and net-zero and carbon neutral commitments. Among other findings, the CAQ highlighted that of the S&P 500 companies, 464 issued a stand-alone ESG report and 313 responded to the CDP Climate Change Questionnaire for the 2020 period. Of the 464 ESG reports issued, 43 obtained some type of assurance from public company auditors. Most companies (93%) issued an ESG report using at least one framework or standard, and more than 230 companies used three or more standards and frameworks to help develop their reports.