By now, we all know that, sooner or later, audit reports for most public companies will be required to disclose critical audit matters, which are intended to make the audit report more informative for investors. (See this PubCo post.) But, as this article from the EY Center for Board Matters reports, over the last several years, companies and their audit committees have gone a long way toward increasing the amount of audit-related information they provide to investors voluntarily. To carry out its assessment, EY reviewed audit-related disclosures in the proxy statements of Fortune 100 companies over the period from 2012 to 2019.  While year to year, the changes appear largely incremental, the change over the entire period is considerable.  

Among the key shifts:

Assessment of Auditor

  • In 2012, none of the Fortune 100 disclosed that the audit committee was involved in selecting the lead audit partner, but in 2019, almost 80% made that disclosure.
  • In 2012, only 16% of companies disclosed that, when assessing auditor independence, the audit committee considered non-audit fees and services; in 2019, 90% made that disclosure.
  • In 2012, 16% of companies disclosed the factors that the audit committee took into account in assessing the qualifications and quality of work of the auditor, while 64% made that disclosure in 2019. These might include, for example, “independence; candor and insight provided to Audit Committee; proactivity; ability to meet deadlines and respond quickly; feasibility, benefits of audit firm/lead partner rotation; content, timeliness and practicality of Audit Firm’s communications with management; adequacy of information provided on accounting issues, auditing issues and regulatory developments affecting financial institutions; timeliness and accuracy of all services presented to Audit Committee for pre-approval and review; management feedback; lead partner performance; and comprehensiveness of evaluations of internal control structure.”
  • In 2012, only a minute percentage of companies stated that the selection of the auditor was in the best interests of the company or its shareholders; in 2019, about 80% made that disclosure.


  • In 2012, about 55% disclosed that the audit committee was independent; that percentage rose to about 65% in 2019.
  • In 2012, about 28% of audit committees had one financial expert, 32% had two and 40% had three or more; in 2019, only about 10% had only one financial expert, 50% had two and 40% had three or more.


  • In 2012, only 3% of the Fortune 100 reported that, when considering whether to retain their current auditors, they took into account the impact of making a change; in 2019, 66% made that disclosure. That disclosure might provide, for example, that the committee “considered the relative costs, benefits, challenges, overall advisability, and potential impact of selecting a different independent public accounting firm.”
  • In 2012, 23% of the Fortune 100 disclosed auditor tenure, compared to 28% in 2019. (Remember that auditors are already required to disclose their tenure in the audit report—see this PubCo post.)
  • In 2012, about 5% disclosed the year that the lead audit partner was appointed; in 2019, 20% made that disclosure.


  • In 2012, none of the Fortune 100 stated that the audit committee was responsible for fee negotiations; in 2019, that percentage had risen to 40%.
  • In 2012, about 10% of companies explained changes in fees paid to the external auditor; in 2019, about 30% provided an explanation. However, most companies did explain the types of services encompassed by each fee category.
  • In 2012, slightly under 10% explained changes in audit fees paid to the external auditor, and in 2019, only about 18% provided that information.

One area that has remained relatively flat is the low percentage (<5%) of companies that that identify the topics discussed by the audit committee and the outside auditor beyond those required by rule.  This disclosure might include, for example, that the audit committee discussed with the auditor “significant risks and exposures identified by management, the overall adequacy and effectiveness of the Company’s legal, regulatory and ethical compliance programs…and the Company’s workplace and distribution safety programs and information technology security programs.”

EY also offered the following questions for the audit committee to consider:

  • “Does the company’s proxy statement effectively communicate how the audit committee is overseeing and engaging with the independent auditor? Does it address areas of investor interest, such as the independence and performance of the auditor and the audit committee’s key areas of focus?
  • How has the role of the audit committee evolved in recent years (e.g., oversight of enterprise risk management, cybersecurity risk), and to what extent are these changes being communicated to stakeholders?
  • What impact will new auditor reporting requirements have on audit committee disclosures?
  • What additional voluntary disclosures might be useful to shareholders related to the audit committee’s time spent on certain activities, such as cybersecurity, business continuity, mergers and acquisitions, and financial statement reporting developments?
  • How do director qualifications and board composition-related disclosures highlight the expertise, experiences and backgrounds of audit committee members?”

Posted by Cydney Posner