Audit committee disclosures in proxy statements keep increasing

Audit committees at public companies have been upping the amount of disclosures they have been providing in proxy statements, especially when it comes to cybersecurity and non-audit services.

A new report released Wednesday by the Center for Audit Quality and Audit Analytics found the most dramatic increase came in disclosure of the audit committee’s responsibility for cybersecurity risk oversight, from 11% of S&P 500 companies in 2016 to 46% of S&P 500 companies in 2021. The report attributed the increase to rising cybercrime and trends towards remote work that have exposed new vulnerabilities. Other disclosures that have been increased, according to the 2021 Audit Committee Transparency Barometer include audit committee oversight of non-audit services, auditor tenure, criteria considered to evaluate the audit firm and involvement in audit partner selection.

“We are pleased to see that the positive, long-term trend of increased audit committee disclosures in public company proxy statements has continued,” said CAQ CEO Julie Bell Lindsay in a statement. “Investors do not always have insight into the oversight activities that audit committees perform, which is why these disclosures are so important.”

Courtesy of the Center for Audit Quality

The annual report examines S&P Composite 1500 proxy disclosures looking at the transparency around audit committee oversight of the outside audit firm and some of the other main audit-related topics. This year’s report cites some examples of effective disclosure from companies including MetLife, Darden Restaurants and KeyCorp.

Despite the increases seen in audit committee disclosures this past year, the CAQ thinks there still needs to be further increases in disclosures by audit committees, especially in the areas of oversight of audit firm compensation, such as fee negotiations, fee changes and the connection to audit quality.

“The Audit Committee Transparency Barometer continues to be the only resource of its kind for audit committees and other stakeholders, providing them with comprehensive data across the S&P 1500 related to the audit committee,” said Audit Analytics CEO Michael Nohrden in a statement. “We are pleased to continue our partnership — now in its eighth year — with the CAQ in developing this important tool.”