The 2013 proxy season saw more Fortune 100 companies increasing public disclosure related to audit committees and auditors. In its newly released report – Audit committee reporting to shareholders – Ernst & Young LLP examines how companies are enhancing audit committee-related disclosures and highlights year-over-year changes in practice.

"Our review shows many Fortune 100 companies are moving towards greater disclosure about audit committee related matters and are often doing so with the encouragement of investors," said Allie Rutherford, Director of the Corporate Governance Center at Ernst & Young LLP.

"An increasing number of audit committee members believe greater audit committee transparency can help increase investor confidence in financial reporting and the work of the audit committee and auditor," said Ruby Sharma, Director of the Audit Committee Center at Ernst & Young LLP. "Our findings can help facilitate meaningful discussion about enhanced disclosures for investors."

Key findings include:

1.      The greatest changes occurred in areas where investors are asking companies to provide more information. Areas where the number of companies providing certain disclosures increased include:

• The selection of the auditor is in the best interests of the company (4% of reviewed companies disclosed this in 2012; 23% of reviewed companies disclosed this in 2013);
• The audit committee was involved in the selection of the lead audit partner (1% of reviewed companies disclosed this in 2012; 17% of reviewed companies disclosed this in 2013);
• The audit committee is responsible for audit fee negotiations (1% of reviewed companies disclosed this in 2012; 9% of reviewed companies disclosed this in 2013).
• The audit committee is responsible for the appointment, oversight and compensation of the audit firm (37% of reviewed companies disclosed this in 2012; 50% of reviewed companies disclosed this in 2013);
• The audit committee considers the impact of changing auditors when assessing whether to retain the current external auditor (3% of reviewed companies disclosed this in 2012; 15% of reviewed companies disclosed this in 2013).

2.      Some companies are innovating with respect to audit-committee-related information – and these informative disclosures may signal disclosure practices that could become more widespread.

• More companies are providing information about changes in audit fees. In 2013, four companies provided an explanation of why audit fees changed from 2012-2013. In 2012, only one company provided such a disclosure.
• Six companies disclosed the topics that audit committees discussed with the external auditor in 2013, up from five in 2012.

EY expects this trend will continue into the 2014 proxy season, as investors will likely continue or increase engagement with companies on this topic through letter-writing campaigns and direct dialogue.

For a full look at the 2013 findings and a complete copy of Audit committee reporting to shareholders: 2013 proxy season update, please visit http://www.ey.com/US/en/Issues/Governance-and-reporting.