Update on the current board issues: December 2014

Audit committee issues


PCAOB looks to issue AQI concept release in 2015

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The PCAOB expects to issue a concept release on the development and use of audit quality indicators (AQI) in early 2015, a PCAOB director said at the AICPA 2014 National Conference on Current SEC and PCAOB Developments.

Greg Jonas, director of the PCAOB’s Office of Research & Analysis, noted that the concept release will likely include a discussion on the background and purpose of the project, the nature of AQIs, the existing list of indicators, and the possible uses of the indicators. The final portfolio of AQIs should help the audit committee ask questions, but is not designed to answer them; AQIs are intended to encourage dialogue that will provide new insights to the audit committee.

At the conference, two members of the PCAOB – Chair James Doty and board member Jay Hanson – also referenced the possibility of a concept release being issued next year. The PCAOB concept release is also intended to gather perspectives on how AQI should be prepared and reported, whether they should be voluntarily provided by the auditor or whether they should be required, and whether they should be shared only with the audit committee or made publicly available.

At the AICPA conference, Cindy Fornelli, executive director of the Center for Audit Quality, said that the development of AQIs is one of the top initiatives for her organization. In April, the CAQ released the CAQ Approach to Audit Quality Indicators. The CAQ believes AQI should be directed at the audit committee, primarily focused on engagement level indicators, and use quantitative rather than qualitative data.

PwC supports the views expressed in the CAQ paper. The firm recognizes the desire by its stakeholders for more insight into its audit practice and supports the CAQ’s approach of using AQI as a way to facilitate meaningful discussions between auditors and audit committees (as part of their oversight role of the auditor).

For more information on AQI and the myriad topics discussed at the 2014 AICPA national conference, read PwC’s In depth publication.


CAQ, Audit Analytics release findings from new Audit Committee Transparency Barometer

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The Center for Audit Quality and Audit Analytics recently released the Audit Committee Transparency (ACT) Barometer, which measures the content of proxy statement disclosures in certain key areas, including auditor oversight and audit committee scope of duties.

The report is based on a review of proxies filed through the end of June 2014 of 1,500 S&P composite companies, including companies in the S&P 500, S&P MidCap 400, and S&P SmallCap 600 indices.

Some of the key findings include:

  • 83% of S&P 500, 69% of S&P MidCap, and 58% of S&P SmallCap companies discussed how non-audit services may impact auditor independence
  • 47% of S&P 500, 42% of S&P MidCap, and 50% of S&P SmallCap companies disclosed the length of time an auditor has been engaged
  • 13% of S&P 500, 10% of S&P MidCap, and 8% of S&P SmallCap companies discussed the audit committee’s considerations in appointing the auditor in terms of qualifications, geographic reach and firm expertise
  • 13% of S&P 500, 4% of S&P MidCap and 1% of S&P SmallCap companies discussed audit fees and their connection to audit quality.