Seven organizations, including the Forum, interested in corporate governance issues have introduced a new tool to assist audit committees in performing an annual evaluation of the external auditor in order to make an informed recommendation to the Board on whether to retain the auditor.
Audit committees play a critical role in the governance of public companies and registered investment companies and in the integrity of financial reporting. They are broadly charged with overseeing a company’s financial reporting process and controls, and hiring, assessing, and overseeing the work of the external auditor – holding themselves and the auditor to the highest standards of independence, objectivity and skepticism.
The new annual evaluation tool provides a brief, scalable approach that allows audit committees to take advantage of formal and informal opportunities to objectively evaluate the auditor’s performance. The tool contains sample questions to gauge the quality of (1) services and sufficiency of resources provided by the auditor, (2) communication and interaction with the auditor, and (3) the auditor’s independence, objectivity and professional skepticism. It also provides a sample form for obtaining input from company personnel. Audit committees also are encouraged to find ways to communicate about how they oversee the auditors to build investor trust and confidence that audit committees are representing their interests.
The new publication can be found here.