Voluntary Audit Committee Disclosures on the Rise
Two studies published last month by Ernst & Young and Deloitte analyze audit committee disclosures in proxy statements of large public companies and conclude that calls by investors and other stakeholders for greater transparency around the role of audit committees have resulted in a voluntary expansion of audit committee disclosures. The Ernst & Young study opines that “this interest in transparency may be due in part to the fact that, even as the obligations of audit committees have expanded over the years, required audit committee disclosures have not,” explaining that many disclosures currently required of audit committees pre-date the Sarbanes-Oxley Act of 2002.
As noted in a previous Ticker report, in 2015, the SEC issued a concept release seeking comments on the effectiveness of audit committee disclosures and whether improvements could be made. To date, the SEC has taken no regulatory action in connection with this concept release; however, the SEC has continued to encourage audit committees to consider expanding disclosure voluntarily.
As discussed in a previous Ticker report, in a March 2017 speech titled “Advancing the Role and Effectiveness of Audit Committees,” SEC Chief Accountant Wesley Bricker recommended that audit committees go beyond required disclosure and aim to “help increase investor understanding of the reliability and quality of financial reporting [by providing] additional insights into how the audit committee has fulfilled its responsibilities, particularly about the audit committee’s work in overseeing the independent auditor and the financial reporting process.”