5 Surprises About Auditor Evaluations

Audit committees annually evaluate their company’s independent auditor, typically just ahead of engaging that auditor for the following year – which happens right after the prior year’s audit is over. Most companies then ask shareholders to ratify the auditor selection at the upcoming annual shareholders meeting. Evaluation is a big responsibility for the audit committee, but doing it isn’t as easy as you might think.

Auditor evaluations are conducted annually so that audit committees comply with their exchange’s listing standards – which state that audit committees have the responsibility to appoint, compensate, retain and oversee the company’s independent auditor.

They also do this because investors expect it – more & more companies discuss their auditor evaluations in their proxy even though it’s not required to let shareholders know what they’re doing.

In recent years, the debate about forcing companies to rotate their auditors has ratcheted up the scrutiny on auditor evaluations. Mandatory auditor rotation. Some companies have had the same auditor for over 100 years.

Here are five things about evaluation of auditors you should know:

• Not realistic to expect a real evaluation
• Check the auditor’s overall reputation
• Informal & not a deep dive
• Be friendly, but not too friendly
• We’re stuck with what we got

For many more Vid-Guides dealing with corporate & securities law, corporate governance, E&S issues and more – particularly if you want to review any Vid-Guides referred to during this Vid-Guide – see the list of Vid-Guides spread throughout these categories:

• Corporate Governance
• Proxy Season
• Executive Pay
• ’34 Act/Other
• ’33 Act/Deals
• Sustainability/E&S
• Career Advice
• Fun Party

And since all the content on ZippyPoint.com is complimentary, please “Pay-What-You-Can” to help keep this fine platform alive & well…