A tool that was developed to help audit committees appoint, oversee, and determine compensation for their external auditors was recently updated by the Center for Audit Quality (CAQ) and the Audit Committee Collaboration.
The External Auditor Assessment Tool, which was first released in 2012, contains sample questions that audit committees can ask during their evaluation of the external auditor, which should be done at least annually.
The questions focus on three specific areas:
- Quality of services and sufficiency of resources provided by the auditor.
- Quality of communication and interaction with the auditor.
- Auditor’s independence, objectivity, and professional skepticism.
“Providing constructive feedback to the external auditor may improve audit quality and enhance the relationship between the audit committee and the external auditor,” the assessment tool states.
The tool also includes a sample form and rating scale for obtaining input from those within the company about the external auditor, along with other resources for audit committees and others charged with corporate governance.
In addition, the updated version of the tool addresses recent changes in accounting and auditing rules and other potential risk areas, such as:
- The Financial Accounting Standards Board’s new revenue recognition, leasing, and credit losses standards that take effect over the next few years.
- New and proposed Public Company Accounting Oversight Board standards, including Form AP and updates to the auditor’s reporting model.
“Although outside the scope of audits of the financial statements and internal control over financial reporting, the audit committee also has, in many instances, been called upon to understand other potential risks facing the company, such as a company’s use of non-GAAP financial information and cybersecurity risk management,” the assessment tool states.
The CAQ is a member of the Audit Committee Collaboration, which was formed to enhance the effectiveness of audit committees through education and other types of support. The Association of Audit Committee Members, Mutual Fund Directors Forum, and the National Association of Corporate Directors also are a part of the seven-member group.
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About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.