Sample audit committee disclosures in 2016

Transcription

1 Sample audit committee disclosures in 2016 December 2016

2 EY Center for Board Matters fifth review of audit committee-related proxy disclosures by Fortune 100 companies shows that companies are continuing to supplement mandatory disclosures with additional voluntary information. This document provides two examples of audit committee disclosure language in four categories, which are highlighted below. For more information on audit committee reporting, see Audit committee reporting to shareholders in 2016 available at ey. com/ b oardmatters. C ateg ory T opic Disclosures in the audit committee report Statement that the audit committee is independent 58% 58% 55% 51% 54% ame of the audit firm is included in the audit committee report 76% 74% 74% 76% 76% Audit committee composition Audit committees ith one financial expert F 26% 24% 28% 26% 28% Audit committees ith t o F s 23% 28% 31% 51% 36% Audit committees ith three or more F s 51% 47% 41% 23% 36% Audit committee responsibilities re: external auditor xplicit statement that the audit committee is responsi le for appointment compensation and o ersi ht of external auditor 82% 81% 68% 55% 42% T b 8 % 8 % 8 % E f 3 % % 9 % opics discussed y th e audit committee and ex ternal auditor 6% 6% Fees paid to the external auditor tatement that the audit committee considers non audit fees ser ices hen assessin auditor independence 81% 82% 79% 79% 14% tatement that the audit committee is responsi le for fee ne otiations 29% 26% 17% 9% 0% x planation prov ided or ch ang e in auditf ees paid to ex ternal auditor 1% 21% Assessment of the external auditor Disclosure of factors used in the audit committee s assessment of the external auditor s qualifications and w ork q uality 5 0% 4 2% 3 3 % 19 % 17 % tatement that the audit committee is in ol ed in lead audit partner selection 73% 67% 49% 17% 1% isclosure of the ear the lead audit partner as appointed 13% 12% 8% 3% 3% tatement that choice of external auditor is in est interest of the compan and or shareholders 73% 63% 49% 22% 3% Tenure of the external auditor isclosure of the len th of the external auditor tenure 63% 62% 51% 29% 24% Statement th at th e audit committee considers th e impact of ch ang ing auditors w h en assessing w h eth er to retain th e current ex ternal auditor 5 3 % 4 7 % 3 3 % 17 % 3 % Accessibility of audit committee charters from proxy statements in oes directl to the charter 12% 15% 15% 10% 8% ompan main e site 37% 40% 40% 41% 45% ompan site for in estor relations 24% 24% 26% 26% 24% ompan site for corporate o ernance matters 27% 21% 19% 23% 23%

3 T opics discussed b y th e audit committee and ex ternal auditor Sample A : ana ement the internal auditors and the independent auditors also made presentations to the audit committee throu hout the ear on specific topics of interest includin the compan s i enterprise ris assessment process ii information technolo s stems and controls iii income tax strate and ris s i deri ati es polic and usa e enefit plan fund mana ement i inte rated audit plan ii updates on completion of the audit plan iii critical accountin policies ix assessment of the impact of ne accountin uidance x compliance ith the internal controls re uired under ection of the ar anes xle Act xi ethics and compliance pro ram xii ris mana ement initiati es and controls for arious ac uisitions and usiness units xiii strate and mana ement of the implementation of ne s stems and xi c ersecurit Sample B : urin mana ement updated its internal control documentation for chan es in internal control and completed its testin and e aluation of the compan s s stem of internal control o er financial reportin in response to the re uirements set forth in ection of the ar anes xle Act of and related re ulations The audit committee as ept apprised of the pro ress of the e aluation and pro ided o ersi ht and ad ice to mana ement durin the process In connection ith this o ersi ht the audit committee recei ed updates pro ided mana ement and the independent auditor at each re ularl scheduled audit committee meetin and met in executi e session separatel ith the internal and the independent auditor to discuss the results of their examinations o ser ations and recommendations re ardin internal control o er financial reportin

4 E x planation prov ided f or ch ang e in f ees paid to ex ternal auditor Sample A : Audit fees ere for professional ser ices rendered for the audits of the compan s consolidated financial statements includin financial statement schedules and statutor and su sidiar audits re ie of documents filed ith the re ie of and opinions on the effecti eness of internal control o er financial reportin and in fiscal pro idin a comfort letter in connection ith the compan s issuance of notes Sample B : All other fees include professional ser ices rendered the audit firm not reported in an other cate or and include preappro ed usiness process ad isor and other ser ices that for relate primaril to an information technolo assessment a mar et demo raphics assessment re ulator trainin and an assessment related to the transition to the ne financial reportin standard applica le in ountr

5 D isclosure of f actors used in th e audit committee s assessment of the external auditor qualifications and work quality Sample A : The committee annuall re ie s the audit firm s performance and independence in decidin hether to retain the audit firm or en a e a different independent re istered pu lic accountin firm In the course of these re ie s the committee considers amon other thin s The ualit and efficienc of the audit firm s historical and recent audit plans and performance on the compan s audit The audit firm s capa ilit and expertise in handlin the readth and complexit of the compan s orld ide operations The audit firm s expertise in and no led e of the lo al industr and its net or of partners and mana ers in the compan s e areas of operation The desired alance of the audit firm s experience and fresh perspecti e occasioned mandator audit partner rotation and the audit firm s periodic rotation of other audit mana ement xternal data on audit ualit and performance includin recent u lic ompan Accountin ersi ht oard A reports on the audit firm and its peer firms The appropriateness of the audit firm s fees for audit and non audit ser ices The ualit and candor of the audit firm s communications ith the committee and mana ement The audit firm s independence and o ecti it The audit firm s tenure as the compan independent re istered pu lic accountin firm includin the enefits of ha in a lon tenured auditor and controls and processes that help safe uard the audit firm s independence Sample B : ach ear the audit committee alon ith the compan mana ement and internal auditors re ie s the audit firm s performance as part of the audit committee s consideration of hether to reappoint the firm as our independent auditors As part of this re ie the audit committee considers i the continued independence of the audit firm ii e aluations of the audit firm our mana ement and internal auditors iii the audit firm s effecti eness of communications and or in relationships ith the audit committee and our mana ement and internal auditors i the len th of time the audit firm has ser ed as our independent auditors and the ualit and depth of the audit firm and the audit team s expertise and experience in the and industries in li ht of the readth complexit and lo al reach of our usinesses

6 Statement th at th e audit committee considers th e impact of ch ang ing auditors w h en assessing w h eth er to retain th e current ex ternal auditor Sample A : The committee en a es in an annual e aluation of the independent pu lic accountin firm s ualifications assessin the firm s ualit of ser ice the firm s sufficienc of resources the ualit of the communication and interaction ith the firm and the firm s independence o ecti it and professional s epticism The committee also considers the ad isa ilit and potential impact of selectin a different independent pu lic accountin firm Sample B : The committee considers hether the independent re istered pu lic accountin firm should e rotated and considers the ad isa ilit and potential impact of selectin a different independent re istered pu lic accountin firm

7 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About the EY Center for Board Matters Effective corporate governance is an important element in building a better working world. The EY Center for Board Matters is committed to bringing together and engaging with boards, audit committee members and investors to exchange ideas and insights. Using our professional competencies, relationships and proprietary corporate governance database, we are able to identify trends and emerging governance issues. This allows us to deliver timely and balanced insights, data-rich content, and practical tools and analysis to boards, audit committees, institutional investors and others interested in governance topics Ernst & Young LLP. All Rights Reserved. SCORE no US CSG no ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.