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Discover the latest insights, resources, and standards in auditing and accounting at the Center for Audit Quality (CAQ) website. Access valuable guidance, research, and tools to enhance your expertise and stay informed in the ever-evolving auditing landscape. 

Hosted by Julie Bell Lindsay, CEO of the Center for Audit Quality, Capital Markets Pulse dives into the latest key matters related to the capital markets featuring experts from across the corporate reporting world.

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Hosted by Julie Bell Lindsay, CEO of the Center for Audit Quality, Capital Markets Pulse dives into the latest key matters related to the capital markets featuring experts from across the corporate reporting world.

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Podcast | Capital Markets Pulse, Episode 9: Paul Munter

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Podcast | Capital Markets Pulse, Episode 8: Richard Jackson

Manager, Professional Practice

Erin Cromwell, CPA is a Manager, Professional Practice at the Center for Audit Quality. Joining the CAQ in 2022, Cromwell manages and supports technical and policy-oriented projects through working groups and task forces with senior audit leaders.

Prior to joining the CAQ, Cromwell worked in KPMG’s audit practice, focusing on both integrated and non-integrated audit engagements for companies in the telecommunications and aerospace and defense industries. She also spent time with KPMG’s environmental, social, and governance (ESG) team, KPMG IMPACT, focusing on ESG attestation and other non-audit services for audit clients.

Cromwell is a Certified Public Accountant in Virginia and holds a bachelor’s degree in accounting from the University of Richmond.

Erin Cromwell, CPA

The increased integration of generative AI (genAI) in organizations’ financial reporting processes is raising important questions about when and how to invest in appropriate technologies that may have an impact on the speed of transformation and the respective organization’s functions....

The increased integration of generative AI (genAI) in organizations’ financial reporting processes is raising important questions about when and how to invest in appropriate technologies that may have an impact on the speed of transformation and the respective organization’s functions. With these changes, how can audit committees exercise oversight responsibilities effectively?

<a href="https://www.thecaq.org/audit-committee-practices-report-2024">A recent joint CAQ survey of audit committees</a> found that 33% of audit committee respondents indicated that finance transformation is one of the top three priorities for their audit committee in the next 12 months. As companies explore the transformative potential of genAI, the role of audit committees is also expanding with new oversight responsibilities.

The CAQ has recently published <a href="https://www.thecaq.org/ac-oversight-in-the-age-of-genai">Audit Committee Oversight in the Age of Generative AI</a> as a resource for audit committees navigating these uncharted waters.
<h3><strong>The Role of Audit Committees</strong></h3>
GenAI’s transformative potential for business processes, including financial reporting, creates exciting opportunities to enhance efficiency, generate new content, and obtain greater insights. However, this technology is not without risks and audit committees can play an important role in overseeing the governance of genAI and understanding its impact on the company’s financial reporting and internal control over financial reporting and the external audit. Audit committees are well-positioned to effectively exercise their oversight given their experience with financial reporting, enterprise risk management, and other emerging topics.
<h3><strong>What is GenAI?</strong></h3>
Audit committees of companies that are deploying genAI should have a foundational understanding of how genAI works and the benefits and risks that may arise from its use. GenAI is a subset of AI that is based on probabilistic technology that can create content, including text, images, audio, or video when prompted by a user. GenAI creates responses using algorithms that are often trained on open-source information, such as text and images from the internet. AI chatbots, like ChatGPT and Copilot, are well-known examples.

Audit committees should be aware that the probabilistic nature of genAI is a key distinction from other technologies that may have historically been used in a company’s financial reporting processes. To this end, genAI technologies are especially helpful for tasks that need creativity or diversity of responses, including generating new content or information, but they may not always provide reliable or repeatable outputs. GenAI technologies do not work like search engines finding facts within their training data but are instead creating new coherent, human-like text. Consequently, human oversight is needed to ensure the accuracy of information generated by genAI.

[custom_quote text="Audit committees should be aware that the probabilistic nature of genAI is a key distinction from other technologies that may have historically been used in a company’s financial reporting processes."]
<h3><strong>Overseeing Management</strong></h3>
A key focus of the audit committee’s oversight will likely be management’s approach to the oversight and governance of genAI. Establishing policies and procedures regarding acceptable use of genAI and assigning responsibility for the technology are foundational for successfully managing the use of genAI throughout the company. To help navigate conversations with management, audit committees may consider posing questions, including:
<ul>
 	<li>Does the company have the requisite expertise to select, develop, deploy, and monitor genAI technologies?</li>
 	<li>What are the company’s objectives and related success criteria for deploying genAI technologies? Are genAI technologies intended to augment or automate existing processes?</li>
 	<li>Who (individual or group) in the company is responsible for oversight of the use of genAI?</li>
 	<li>Has management established policies regarding the acceptable and ethical use of genAI?</li>
 	<li>Does the company have a process to track and monitor the use of genAI throughout the company, including use by third-party service providers?</li>
 	<li>How does the company track risks arising from the use of genAI technologies and mitigating responses?</li>
</ul>
Data privacy and security will also likely be a key focus area for audit committees. Maintaining the confidentiality of the company’s data, particularly data used in the financial reporting process, should be top of mind when selecting genAI technologies and developing policies regarding the acceptable use of those technologies. Further, the use of genAI technologies can introduce new cybersecurity risks to the company. Appropriate safeguards should be implemented protect against malicious threats.

Through the audit committee’s oversight of the financial reporting process, the audit committee should also understand how genAI technologies are integrated into relevant processes, how those technologies are selected, tested, and monitored, and how the company provides training and guidance to employees to promote consistent and effective use.

[custom_quote text="The use of genAI technologies can introduce new cybersecurity risks to the company. Appropriate safeguards should be implemented protect against malicious threats."]
<h3><strong>Overseeing the External Auditor</strong></h3>
The audit committee’s oversight of the external auditor is one of its core responsibilities and directly contributes to audit quality. Active and engaged audit committees have open dialogue with the external auditor on matters critical to the audit, which would likely include discussion to understand how the company’s use of genAI in financial reporting processes or internal control over financial reporting impacts the auditor’s risk assessment and planned audit approach.

Audit committees can use some of the following questions to better understand how the auditor plans to respond to the company’s use of genAI
<ul>
 	<li>What is the experience of the engagement partner and other senior engagement team members with genAI technologies? Would the firm be able to supplement the engagement team’s expertise if necessary (e.g., by engaging qualified specialists)?</li>
 	<li>What is the auditor’s understanding of the financial reporting implications of the company’s use of genAI technologies?</li>
 	<li>How has the impact of the company’s use of genAI technologies been considered during the auditor’s risk assessment process?</li>
 	<li>Does the company’s use of genAI technologies have a significant impact on the planned audit scope?</li>
 	<li>Has the auditor identified any fraud risks related to the company’s use of genAI technologies? How has the auditor addressed such risks in the audit?</li>
</ul>
When it comes to the transformative power of genAI and its integration into the financial reporting process, audit committees play a crucial role. Effective oversight by strong, active, knowledgeable, and independent audit committees significantly furthers the collective goal of providing high-quality, reliable financial information in the capital markets.

Explore our resource, <a href="https://www.thecaq.org/ac-oversight-in-the-age-of-genai">Audit Committee Oversight in the Age of Generative AI</a>, for more detail on how audit committees can effectively exercise their oversight responsibilities related to the use of genAI.

As genAI evolves and becomes a component of how financial reporting professionals operate, the CAQ will continue to monitor its impact on our profession and beyond. To get the latest insights, explore our <a href="https://www.thecaq.org/resource-hub">resources</a> and subscribe to our newsletters to learn more.

[custom_quote text="Effective oversight by strong, active, knowledgeable, and independent audit committees significantly furthers the collective goal of providing high-quality, reliable financial information in the capital markets."]

The Age of Generative AI: How Audit Committees Can Respond

Audit Committee

Emerging Reporting Areas

Senior Director, Professional Practice

Desiré Carroll, CPA, CA(SA) is a Senior Director, Professional Practice at the Center for Audit Quality. Her role involves advancing technical and policy-oriented projects to identify, develop, and seek consensus on issues affecting the public company auditing profession. This includes engaging with senior leaders across the financial reporting ecosystem, drafting comment letter responses to regulators, and developing thought leadership publications.

Before joining the CAQ, Desiré served as Associate Director – Sustainability Assurance at the American Institute of Certified Public Accountants (AICPA). Prior to that, she spent over 11 years at Deloitte primarily in their New York M&amp;A Transaction Services group and initially in their Audit practice. Desiré is a CPA and a South African Chartered Accountant.

Desiré Carroll, CPA, CA(SA)

Throughout my career, I’ve been focused on better understanding our financial reporting landscape, which continues to evolve at a rapid pace. One area that I have found myself particularly immersed in has been environmental, social and governance (ESG) reporting. It...

Throughout my career, I’ve been focused on better understanding our financial reporting landscape, which continues to evolve at a rapid pace. One area that I have found myself particularly immersed in has been environmental, social and governance (ESG) reporting. It first hit my radar over a decade ago. Over time, large investors increasingly demanded that public companies be more transparent about the impact of climate-related risks on their business (the ExxonMobile shareholder vote in 2017 stands out as a watershed moment). Since then, discourse around ESG has only increased and global ESG reporting rules and regulations have established this area of corporate reporting as a fixture.

When I joined the CAQ in 2021, I became part of a several year effort to better understand how public companies are reporting and assuring ESG-related information. This effort, which analyzes S&amp;P 500 companies and their ESG reporting practices, answers questions such as which reporting standards and frameworks companies are using, if they’re seeking assurance on this information, which organizations are performing the assurance services, and what standards those organizations use to perform their assurance engagements.

With the majority of companies in the S&amp;P 500 reporting some form of ESG information, this is an area of corporate reporting that I believe is here to stay, though it is likely to continue to evolve. Here are my top observations from our <a href="https://www.thecaq.org/sp-500-and-esg-reporting">2024 S&amp;P 500 ESG Reporting and Assurance Analysis</a>.
<h3><strong>Multiple standards and frameworks continue to be used to report ESG information </strong></h3>
According to our latest report, which covers 2020 - 2022 reporting, S&amp;P 500 companies continued to reference a variety of ESG reporting standards and frameworks, which they used to varying degrees. In 2022, we noted increases in the use of the SASB, TCFD, and GRI standards/frameworks with a slight decline in references to the Integrated Reporting Framework. In 2022, SASB, GRI and TCFD remained the most frequently mentioned reporting standards or frameworks. With the formation of the ISSB, we also found that 17 companies mentioned the ISSB in their ESG reporting - a number we expect to increase in 2023 and beyond.

While voluntary ESG reporting has continued to evolve, so too have regulatory reporting requirements. In the U.S., under the SEC’s <a href="https://www.sec.gov/files/rules/final/2024/33-11275.pdf">final climate rule,</a> public companies will be expected to provide climate-related disclosures in their annual reports and registration statements beginning with annual reports for the year ending December 31, 2025. In <a href="https://www.thecaq.org/aia-sec-climate-rule-part-2-what-we-were-looking-for-in-the-final-rule-versus-what-we-found">this blog</a>, I share an overview of the rule’s final requirements.  Further, the 2023 California climate disclosure laws (<a href="https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB253">SB 253</a>, <a href="https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB261">SB 261</a>, and <a href="https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240AB1305">AB1305</a>) and the EU’s <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022L2464">Corporate Sustainability Reporting Directive</a> will impact certain US companies’ ESG reporting going forward.

[custom_quote text="While voluntary ESG reporting has continued to evolve, so too have regulatory reporting requirements."]
<h3><strong>Assurance over this information continues to increase, including assurance from auditors </strong></h3>
In 2022, there was an increase in companies obtaining assurance or verification over ESG-related reporting. The CAQ observed that 340 S&amp;P 500 companies disclosed receiving some form of assurance or verification over certain ESG metrics in 2022, representing a 6% increase from the 320 companies that did so in 2021. Overall, 70% of reporting companies obtained assurance over some ESG information. The percentage of companies that obtained assurance and engaged public company auditors to perform their assurance engagements continued to increase, shifting from 18% in 2021 to 21% in 2022.

These insights reaffirmed what we know to be true: public company auditors <a href="https://www.thecaq.org/wp-content/uploads/2021/03/caq_rota-esg-a-deeper-dive-on-assurance_2021-03.pdf">play a critical role</a> in serving the public interest and supporting the flow of reliable information for decision-making. Auditors comply with rigorous requirements for independence, firm systems of quality control, and subject matter competency. Auditor assurance over ESG metrics can enhance stakeholder trust and confidence in management’s assertions, data, and disclosures.

[custom_quote text="The percentage of companies that obtained assurance and engaged public company auditors to perform their assurance engagements continued to increase."]
<h3><strong>The scope of information subject to assurance continues to increase </strong></h3>
The specific disclosures that S&amp;P 500 companies sought assurance over varied. Some companies obtained assurance over select metrics related to GHG emissions and others sought assurance over a wider range of ESG metrics like water, energy, and waste metrics. Overall, the scope of information subject to assurance continued to increase with most companies assuring their greenhouse gas (GHG) emissions and at least 1 – 3 other ESG metrics. This differs from what we had seen in prior years, where most companies had elected to assure only their GHG emissions.
<h3><strong>Certain assurance/verification providers’ descriptions of compliance with assurance standards indicate limited compliance</strong></h3>
Looking at both the public company auditors and other assurance/verification providers who used the IAASB’s assurance standards to perform their assurance engagements, we explored how each described their application and adherence to certain ISAE 3000 (Revised), <em>Assurance Engagements Other than Audits or Reviews of Historical Financial Information, </em>requirements.

We looked for the assurance/verification provider’s adherence to the following reporting requirements:
<p style="padding-left: 25px;">The requirement to include (in the assurance provider’s assurance report):</p>

<ul>
 	<li>A statement that the engagement was performed in accordance with the assurance standard.</li>
 	<li>A statement that the quality standards ISQC 1 or ISQM 1 (or other requirements that are at least as demanding) were applied and</li>
 	<li>A statement that the assurance provider complies with the independence and other ethical requirements of the IESBA Code (or other requirements that are at least as demanding as the IESBA Code).</li>
</ul>
[custom_quote text="Overall, other assurance/verification providers’ descriptions of compliance indicated limited compliance with these requirements."]

Overall, other assurance/verification providers’ descriptions of compliance indicated limited compliance with these requirements: roughly 20% did not indicate that their engagement was performed in accordance with the assurance standard, 43% did not mention use of any quality standards and 14% did not mention use of any independence or ethical requirements. Further, of the 64% of other assurance/verification providers that indicated use of an equivalent ethics code, the majority indicated that they had used their own code of conduct. In contrast, all public company auditors that applied the IAASB assurance standards, indicated compliance with each of the above IAASB requirements. Compliance with the IAASB assurance standards results in more consistent application of the standards and more comparable outcomes for report users like investors and other stakeholders.

In the report, we observed several other trends, such as increased reporting and assurance of all 15 different Scope 3 emissions categories and increased disclosures of net-zero or carbon neutral commitments.

With ESG remaining a topic of focus for our profession and as we monitor the impact of the <a href="https://www.thecaq.org/aia-sec-climate-rule-part-2-what-we-were-looking-for-in-the-final-rule-versus-what-we-found">U.S. Securities and Exchange Commission’s final climate-related disclosures rule</a>, the CAQ remains committed to <a href="https://www.thecaq.org/esg">developing resources</a> to support public company auditors navigating this landscape. Explore the full S&amp;P 500 ESG analysis <a href="https://www.thecaq.org/sp-500-and-esg-reporting">here</a>.

S&P 500 Analysis: ESG Reporting Continues to Evolve

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https://www.thecaq.org/wp-content/uploads/2023/08/Kecia-Smith-55-EDITCROPPED-685x485.jpg

Kecia-Smith-55-EDITCROPPED

Kecia Williams Smith, Ph.D., CPA

North Carolina Agricultural and Technical State University

All around the country, students are graduating from college and embarking on their career journey. Congratulations, Class of 2024! With this new wave of students starting their careers, I wanted to highlight the importance of diversity and inclusion in the...

All around the country, students are graduating from college and embarking on their career journey. Congratulations, Class of 2024! With this new wave of students starting their careers, I wanted to highlight the importance of diversity and inclusion in the accounting profession and the unique role that Historically Black Colleges and Universities (HBCUs) play.

Hello, I’m Kecia Williams Smith, an Associate Professor at North Carolina Agricultural and Technical State University where I lead the Master of Accountancy (MACC) Program and the Center for Accounting Diversity. As a former audit practitioner and regulator, I implement my experiences into innovative academic programming and research related to audit and regulatory communication, auditor judgment and decision-making, audit regulation, and accounting diversity. I strive to spread awareness, elevate the African American presence within the accounting profession, and advocate on behalf of fellow HBCU faculty and students in the workforce.

As we celebrate new graduates, it is crucial to understand the impact Historically Black Colleges and Universities (HBCUs) have had on the profession. I would not be where I am today without the tireless efforts of the pioneers who paved the way and broke down the barriers. It is my pleasure to spotlight historical trailblazers who played a role in adopting accounting programs across HBCUs.
<h3><strong>Jesse Blayton: A Pioneer in Accounting Education</strong></h3>
<img class="wp-image-15114 alignright" src="https://www.thecaq.org/wp-content/uploads/2024/06/2024_06_AiA_Jesse-Blayton.png" alt="" width="350" height="220" />

As Georgia’s first black Certified Public Accountant (CPA), Jesse B. Blayton was a trailblazer. A graduate of Langston University and a veteran of World War I, Blayton passed Georgia’s accounting examination in 1928 and became <a href="https://nsbcpa.memberclicks.net/index.php?option=com_dailyplanetblog&amp;view=entry&amp;year=2020&amp;month=07&amp;day=06&amp;id=4:jesse-blayton">the fourth African-American to become a CPA</a>.

Blayton also recognized the importance of representation and sought to recruit black students and professionals to enter accounting. In 1944, he authored the book “Essentials of Accounting” and continued to promote the profession. Through his leadership, he became known as the “Dean of Negro Accountants.”

Aside from accounting, Blayton also invested in the community. In 1928, Blayton and two partners reorganized the Citizens Trust Bank, the first Black bank to join the Federal Reserve. Blayton acknowledged that he wanted his banks to be the source of funding for aspiring Black professionals.

In 1949, Blayton <a href="https://www.radiohalloffame.com/jesse-b-blayton-sr">purchased a radio station</a> in Atlanta. The 1,000-watt radio station WERD became the first Black-owned station. WERD’s programming included public service announcements, educational pieces, church services, jazz and gospel music, community news, and more. Blayton used his radio station to elevate the civil rights movement by serving as an information outlet for the campaign and prominent civil rights leaders, such as Martin Luther King, Jr. For his pioneering work, Blayton was inducted into the Radio Hall of Fame in 1955.

[custom_quote text="In 1949, Blayton purchased a radio station in Atlanta. The 1,000-watt radio station WERD became the first Black-owned station."]
<h3><strong>Dr. Ruth Coles Harris: A Pioneer for Black CPAs</strong></h3>
<img class="alignright wp-image-15117" src="https://www.thecaq.org/wp-content/uploads/2024/06/2024_06_AiA_RC-Harris.png" alt="" width="350" height="220" />

Dr. Ruth Coles Harris blazed a path of opportunities for many future accounting students. In 1962, she because the first Black woman CPA in Virgina. Fewer than 100 African-Americas held CPA licenses at the time in the United State and only one other was licensed in the state of Virginia.

Obtaining her license was no easy feat and she overcame many barriers to obtain it.  At the time she sat for the CPA, the testing location in Virginia Beach did not have any hotels that allowed African Americans and so she had to stay out of town every day after testing. However, she persevered and succeeded in obtaining her CPA.

Her love for accounting is also what brought her into education. In Virgina, there were no firms hiring African-American accountants at the time. However, Virginia Union University reached out about an opportunity as an Accounting professor. She then went on to serve as the founding Dean of the Sydney Lewis School of Business at Virginia Union University, helping to grow the program.

Her contributions to the accounting profession paved the way for many students who aspire to study and excel in the field of accounting today. I had the pleasure of meeting up with Dr. Ruth Coles Harris recently and at 95 years young, her quick wit and great intellectual capacity were in full display.

[custom_quote text="Dr. Ruth Coles Harris then went on to serve as the founding Dean of the Sydney Lewis School of Business at Virginia Union University, helping to grow the program."]
<h3><strong>Milton Wilson: A Barrier-Breaking Dean</strong></h3>
<img class="alignright wp-image-15115" src="https://www.thecaq.org/wp-content/uploads/2024/06/2024_06_AiA_Milton-Wilson.png" alt="" width="350" height="220" />

Hailing from a family of public school teachers, Dr. Milton Wilson set out to continue a legacy of education. Dr. Wilson earned two doctorate degrees, one in accounting, from Indiana University at Bloomington.

After completing his education, Dr. Wilson became the head of the accounting department at Hampton Institute and subsequently at Dillard University. In 1949, Dr. Wilson established and led the Department of Business at the Texas Southern University (TSU) in Houston, which would eventually become the School of Business. In 1952, Dr. Milton Wilson received his accounting license and made history as Texas’ first black CPA.

Dr. Wilson continued to teach at TSU until 1970 when he returned to his alma mater. However, in 1971, Dr. Wilson <a href="https://www.aacsb.edu/about-us/advocacy/member-spotlight/influential-leaders/2015/milton-wilson">accepted the invitation from Howard University</a> to establish a new school of business. When it was first established, the school had eight or nine faculty members and approximately 200 students. But under Dr. Wilson’s leadership, Howard University’s new business school grew to roughly 80 full-time faculty members and nearly 1,800 students. Under Dr. Wilson was crucial to Howard becoming the first business school in the Washington, DC area to be <a href="https://www.aacsb.edu/about-us/advocacy/member-spotlight/influential-leaders/2015/milton-wilson">accredited by the AACSB</a>.

His effort laid the groundwork for future generations of students pursuing an accounting career at an HBCU.

[custom_quote text="Under Dr. Wilson’s leadership, Howard University’s new business school grew to roughly 80 full-time faculty members and nearly 1,800 students."]
<h3><strong>Quiester Craig: A Supporter of Students</strong></h3>
<img class="alignright wp-image-15116" src="https://www.thecaq.org/wp-content/uploads/2024/06/2024_06_AiA_Quiester-Craig.png" alt="" width="350" height="220" />

Lastly, I’m honored to spotlight my alma mater and current workplace, the<u>Willie A. Deese College of Business and Economics at North Carolina A&amp;T State University</u>. The last pioneer on my list is Dean Emeritus Quiester Craig, who served as Dean of the College of Business and Economics for 42 years. Until his retirement in 2013, Dean Craig’s leadership impacted the lives of thousands of students.

<a href="https://relations.ncat.edu/pubs/alumnitimes/2013/mar14/dean-craig.html">Dean Craig’s journey</a> with NC A&amp;T started in 1972 when he was appointed professor of accounting and dean of the School of Business and Economics. Before his tenure, Dean Craig had already broken barriers as one of the first African Americans to earn CPA licensure. However, the records kept coming under his leadership. During his time, the school’s undergraduate programs were accredited by the AACSB, and NC A&amp;T became the third HBCU to receive international accreditation from AACSB and the first to receive separate accreditation for the accounting program in 1986.

Accreditations aside, Dean Craig also <a href="https://relations.ncat.edu/pubs/alumnitimes/2013/apr25/dr-craig.html">understood the importance</a> of financial support. During his leadership, many students were able to pursue their accounting interests thanks to scholarships from donors and the communities. Dean Craig recognized that many students only needed the opportunity to show their talent, grit, and determination to succeed. To this day, his endowed scholarships continue to provide higher education access for many students.  Dean Craig will be recognized with the American Accounting Association (AAA) Lifetime Achievement Award in August 2024 at the AAA Annual Meeting.

[custom_quote text="I grew up in an era where the opportunities available were a fantasy – they didn’t exist. Now we have transitioned to a time where preparation can be the foundation to get something started." attribution='Dean Emeritus Quiester Craig']

While accounting programs have grown at HBCUs, more must be done to ensure they receive the same financial support as programs at non-HBCUs. In recent years, many leading accounting firms have pledged financial support for Diversity, Equity, and Inclusion (DEI) efforts to better reflect the population the accounting profession serves. However, in <a href="https://publications.aaahq.org/accounting-horizons/article-abstract/38/1/49/12205/Accounting-Firm-Investment-in-Diverse-Talent?redirectedFrom=fulltext">research</a> for the American Accounting Association, my colleagues and I noticed a discrepancy between charitable giving from accounting firms to HBCUs and non-HBCUs. While charitable giving to HBCUs has increased in recent years, the total allocation percentage to HBCUs remains relatively stagnant. Even within HBCU funding, smaller HBCUs do not receive the same amount of support as well-known HBCUs. For our profession to truly reflect the population it serves, I encourage leaders at accounting firms to pursue equal access and equitable financial support when making an impact via charitable giving.

While there is still work to be done as our profession continues to cultivate a more diverse workforce, I am proud of these educators who have helped pave the way with their perseverance, dedication, and passion. As we look for ways to increase diversity in the profession, I encourage you to check out the CAQ’s Bold Ambition and for students interested in pursuing a career in accounting, visit <a href="http://www.joinaccountingplus.org">Accounting+</a>.

Accounting Milestones: The Importance of HBCUs

Audit Committee Effectiveness: A Webinar Series | Episode 6
Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from...

<h4>Audit Committee Effectiveness: A Webinar Series | Episode 6</h4>
<em>Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from leaders in the financial reporting ecosystem alongside resources developed to aid audit committees and public company board members. Stay tuned to this page for information about topics, participants, and how to register for upcoming webinars.</em>

<img class=" wp-image-12997 alignnone" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2022/11/CAQ_NACD_400x150.png" alt="CAQ NACD" width="200" height="75" />

Enterprise Risk Management (ERM) is essential for audit committee members, offering insights into identifying, assessing, and mitigating risks that impact organizational objectives. Join the CAQ, NACD and our panel of experts for a discussion on how audit committees can fulfill their oversight responsibilities related to ERM through the lens of frameworks, regulatory expectations, and best practices for effective risk oversight. Participants will learn how to enhance risk reporting, improve decision-making, and ensure alignment with strategic goals.

<em><strong>Note</strong>: CPE available only to participants who joined the live webcast.</em>

Enterprise Risk Management for Audit Committees

Event

This hour-long webcast will showcase regulatory and practice developments of interest to public companies and their auditors. Panelists include staff from the SEC’s Division of Corporation Finance and the SEC’s Office of the Advocate for Small Business Capital Formation. Panelists...

This hour-long webcast will showcase regulatory and practice developments of interest to public companies and their auditors. Panelists include staff from the SEC’s Division of Corporation Finance and the SEC’s Office of the Advocate for Small Business Capital Formation. Panelists will discuss comments issued on SEC filings and lessons learned from the 2023 reporting cycle. Panelists will also discuss the role of the Office of the Advocate for Small Business Capital Formation, including the resources they offer small businesses and the firms that serve them.

<em><strong>Note</strong>: CPE available only to participants who joined the live webcast.</em>

Audit Insider Webinar | July 2024

Audit Committee Effectiveness: A Webinar Series | Episode 5
Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from...

<h4>Audit Committee Effectiveness: A Webinar Series | Episode 5</h4>
<em>Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from leaders in the financial reporting ecosystem alongside resources developed to aid audit committees and public company board members. Stay tuned to this page for information about topics, participants, and how to register for upcoming webinars.</em>

<img class=" wp-image-12997 alignnone" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2022/11/CAQ_NACD_400x150.png" alt="CAQ NACD" width="200" height="75" />

Join us for a discussion about the <a href="https://www.thecaq.org/audit-committee-practices-report-2024">third edition of the Audit Committee Practices Report</a>, a collaboration between Deloitte’s Center for Board Effectiveness and the Center for Audit Quality. Based on survey findings, this webinar offers audit committee members and those who work with them an opportunity to hear about committee priorities, challenges, and opportunities, as well as leading practices around audit committee effectiveness.

<em><strong>Note</strong>: CPE available only to participants who joined the live webcast.</em>

2024 Audit Committee Practices Report Webinar

The SEC has adopted new climate-related disclosure rules. The Center for Audit Quality and Anita Chan, who played an active role in the development of the proposed rule, will be breaking down the new rules in this informative session and...

The SEC has adopted new climate-related disclosure rules. The Center for Audit Quality and Anita Chan, who played an active role in the development of the proposed rule, will be breaking down the new rules in this informative session and answering questions such as:
<ul>
 	<li>What will companies need to disclose?</li>
 	<li>What are the attestation requirements?</li>
 	<li>When will these rules take effect?</li>
</ul>

Breaking Down the New SEC Climate-Related Disclosure Rules

Preparers/Issuers

Audit Committee Effectiveness: A Webinar Series | Episode 4
Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from...

<h4>Audit Committee Effectiveness: A Webinar Series | Episode 4</h4>
<em>Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from leaders in the financial reporting ecosystem alongside resources developed to aid audit committees and public company board members. Stay tuned to this page for information about topics, participants, and how to register for upcoming webinars.</em>

<img class=" wp-image-12997 alignnone" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2022/11/CAQ_NACD_400x150.png" alt="CAQ NACD" width="200" height="75" />

The increasingly rapid adoption of artificial intelligence-enabled technology has sparked a dialogue about how to encourage innovation while addressing the associated risks. AI has been around for decades but the advancement in the past 18-months, powered by the likes of OpenAI’s ChatGPT and Google’s Bard, is capturing the attention of corporate leaders around the world.  AI is increasingly finding its way into product design and even non-tech companies are already monetizing new products with embedded AI.

Companies are excited about the prospects AI can offer; at the same time, there are concerns about the elevated risk profile it introduces. Corporate boards are focusing on better understanding the technology and establishing guardrails to ensure risks of information security, data quality, hallucinations, and other areas are appropriately managed. Join the CAQ and NACD for a webinar to learn about what AI is and isn’t, examples of how businesses are using the technologies that encompass it in financial reporting, and what questions boards should ask of corporate management.

<em><strong>Note</strong>: CPE available only to participants who joined the live webcast.</em>

Artificial Intelligence (AI) 101 For Audit Committees

Washington DC, June 17, 2024 – The CAQ Governing Board elected Brian Becker, Managing Partner and CEO, RSM US LLP (RSM), as the new Vice Chairman of the Governing Board, effective June 14, 2024.

Becker oversees the firm’s strategy and operations...

<strong>Washington DC</strong>, <strong>June 17, 2024</strong> – The CAQ Governing Board elected Brian Becker, Managing Partner and CEO, RSM US LLP (RSM), as the new Vice Chairman of the Governing Board, effective June 14, 2024.

Becker oversees the firm’s strategy and operations across four countries—the United States, Canada, El Salvador and India. Becker is driving RSM to become a digital firm and is committed to advancing the firm’s inclusive culture, as well as to continuing its longstanding history of stewardship.

“With his extensive experience and long-standing dedication to the profession, Brian will be essential to the CAQ as we work to instill trust in corporate reporting and the integrity of the auditing process,” said Julie Bell Lindsay, Chief Executive Officer, Center for Audit Quality.

“In this time of accelerating change for the auditing profession, the CAQ’s mission of enhancing trust and transparency is more important than ever,” said Becker. “I look forward to continuing to serve on the Board in the role of Vice Chair as we address the challenges and opportunities that lie ahead.”

Becker succeeds Wayne Berson, Chief Executive Officer, BDO USA and Chairman, BDO International. “I also want to extend our gratitude to Wayne for his time and energy as Vice Chair of our Governing Board since 2019. With his vision and leadership, Wayne has been an essential driver of our goals and commitment to strengthening the work of public company auditors,” said Lindsay.

The CAQ’s Governing Board is comprised of a variety of leaders representing the financial reporting ecosystem, including chief executive officers from some of the largest public company audit firms, the American Institute of CPAs, as well as independent board members from investor, board member and issuer communities.

<strong>About the Center for Audit Quality
</strong>
The CAQ champions the public interest in the capital markets by:
<ul>
 	<li>Elevating the quality, credibility, and transparency of public company audits;</li>
 	<li>Advancing critical issues affecting public company audits;</li>
 	<li>Driving innovation in assurance; and</li>
 	<li>Providing a collaborative forum for capital market stakeholders to address evolving needs and challenges.</li>
</ul>
As the voice of the public company audit profession, we work to instill trust in corporate reporting and the integrity of the auditing process, ultimately empowering investors, companies, and society as a whole.

<strong>Contact:</strong>
Brad Jacklin
Director of Communications
Bjacklin@thecaq.org
(202)-494-9560

RSM CEO Brian Becker Elected as New Vice Chair of CAQ Governing Board

Press Releases

Company Management

Washington DC, April 2, 2024 – Paul Knopp, KPMG U.S. Chair and CEO, has been elected Chair of the CAQ’s Governing Board, effective April 1, 2024.

The CAQ’s Governing Board is comprised of a variety of leaders representing the financial reporting...

<strong>Washington DC, April 2, 2024 – </strong>Paul Knopp, KPMG U.S. Chair and CEO, has been elected Chair of the CAQ’s Governing Board, effective April 1, 2024.

The CAQ’s Governing Board is comprised of a variety of leaders representing the financial reporting ecosystem, including chief executive officers from some of the largest public company audit firms, the American Institute of CPAs, as well as independent board members from investor, board member and issuer communities. The Governing Board oversees the CAQ’s strategic agenda and activities.

“The financial reporting landscape is constantly evolving, creating new challenges and opportunities for the public company audit profession,” said Julie Bell Lindsay, Chief Executive Officer, CAQ. “With his extensive experience serving large, multinational clients as an audit partner and his leadership and long-standing dedication to the profession as the Chair and CEO at KPMG,  Paul will be essential to the CAQ as we fulfill our mission of supporting high-quality financial reporting, convening capital market stakeholders to advance discussions on audit quality issues and championing policies and standards that bolster and support audits.”

“With rapidly emerging technologies such as generative AI, new corporate reporting areas including new climate disclosure rules and a need to strengthen the talent pipeline for the future, now is a transformative time for the public company audit profession,” said Knopp. “I look forward to supporting the CAQ in executing their strategic agenda and supporting the profession as it embraces the future of financial reporting while maintaining a laser focus on investor protection through high-quality audits.”

Knopp succeeds Tim Ryan, US Senior Partner at PwC. “Tim has been instrumental in leading the CAQ to help address some of the most important issues impacting our profession, from the talent pipeline to helping the profession lead the way in emerging areas of corporate reporting like climate and cybersecurity,” said Lindsay.

<strong>About the Center for Audit Quality</strong>

The Center for Audit Quality (CAQ) is a nonpartisan public policy organization serving as the voice of US public company auditors and matters related to the audits of public companies. The CAQ promotes high-quality performance by US public company auditors; convenes capital market stakeholders to advance the discussion of critical issues affecting audit quality, US public company reporting, and investor trust in the capital markets; and using independent research and analyses, champions policies and standards that bolster and support the effectiveness and responsiveness of US public company auditors and audits to dynamic market conditions.

KPMG U.S. Chair and CEO Paul Knopp to Helm CAQ’s Governing Board

Two-thirds of audit committee members see opportunities to improve effectiveness,
 according to Deloitte, Center for Audit Quality Survey
NEW YORK, March 12, 2024 —The “Audit Committee Practices Report: Common Threads Across Audit Committees,” a joint effort between Deloitte’s Center for Board Effectiveness...

<p style="text-align: center;"><em>Two-thirds of audit committee members see opportunities to improve effectiveness,</em></p>
<p style="text-align: center;"><em> according to Deloitte, Center for Audit Quality Survey</em></p>
<strong>NEW YORK, March 12, 2024 —</strong>The “Audit Committee Practices Report: Common Threads Across Audit Committees,” a joint effort between Deloitte’s Center for Board Effectiveness and the Center for Audit Quality (CAQ), identified cybersecurity as the top priority in the next 12 months.

A total of 266 respondents participated in this year’s survey, most of whom are from US public companies (74%), and of which 81% have more than $700 million in market cap.

Respondents cited enterprise risk management (ERM) as the No. 2 priority, demonstrating a broader, more holistic view of risk. Meanwhile, trending topics like artificial intelligence (AI) governance and environmental, social and governance (ESG) reporting are receiving comparably less attention.

“We are seeing the role of the audit committee continue to evolve and adapt as demands on oversight responsibilities change with the business environment and investor expectations,” said Vanessa Teitelbaum, senior director, Professional Practice at CAQ. “Audit committees are zeroed in on one of their core responsibilities: overseeing enterprise risk programs at large. While their agenda continues to grow and expand, key areas like cybersecurity and ERM remain a central focus.”

In addition to cybersecurity and ERM, finance and internal audit talent (a new entry in this year’s survey), compliance with laws and regulations, and finance transformation rounded out the top five priorities. Although the majority of respondents view internal audit as an effective function — one that adds demonstrable value — nearly 80% believe there is an opportunity for internal audit to add even more value. Audit committees are also increasingly prioritizing compliance with laws and regulations, with more than one-third citing it as a top-three priority, a significant increase from last year.

<strong>Cybersecurity remains No. 1 priority for audit committees, followed by ERM</strong>

Cybersecurity topped the list of committee priorities by nearly 20 percentage points over ERM. Notably, 58% of respondents said the audit committee has primary oversight over cybersecurity, with 25% indicating the full board has oversight responsibility. Sixty-nine percent of respondents highlighted cybersecurity as a top concern in the next 12 months, with 3-in-10 ranking it No. 1.

The heightened focus on cybersecurity is likely due to greater disclosure requirements from regulatory agencies. The U.S. Securities and Exchange Commission (SEC), for example, is requiring new disclosures on cybersecurity risks and incidents, as well as management and strategy, including an explanation of oversight processes.

When considering what additional expertise would enhance the audit committee's effectiveness, cybersecurity was highlighted as the top area (44%). This is particularly notable given that almost half (48%) of respondents said they have some level of cybersecurity expertise on the committee.

The evolving risk landscape and emerging risks have put an increased spotlight on ERM. Nearly half of respondents indicated that ERM will be a top focus area in the next 12 months. More than three quarters (85%) of respondents reported some level of ERM expertise on the audit committee, positioning it to effectively oversee management’s risk programs.

<strong>Opportunities for audit committees to increase effectiveness </strong>

With a growing agenda and evolving responsibilities, audit committee members see an opportunity for continuous learning and improvement and have perspectives on how they could enhance their effectiveness. Only one-third of respondents say the committee is effective as is, while the rest feel there is at least one strategy that could boost general effectiveness. Those respondents highlighted three key areas for improvement:
<ul>
 	<li>Increased discussion and/or engagement from members during meetings — highlighted by 29% of respondents.</li>
 	<li>Improved quality of pre-read materials — highlighted by 28% of respondents.</li>
 	<li>Improved quality of presentations during meetings — highlighted by 26% of respondents.</li>
</ul>
“The effectiveness of an audit committee can be distinguished by how it executes its responsibilities,” said Krista Parsons, Audit &amp; Assurance managing director, Audit Committee Program leader, and Governance Services leader at Deloitte’s Center for Board Effectiveness. “Key to this is including the right topics on the agenda, obtaining information that enhances comprehension of these issues, and fostering candid and transparent discussions. These are among the actions that audit committee members can take to be prepared for the issues facing them today and in the future."

<strong>About the survey</strong>

This edition of the “Audit Committee Practices Report,” like prior editions, is based on a survey of audit committee members. A total of 266 respondents participated in this year’s survey, most of whom are from US public companies (74%) and of which 81% have more than $700 million in market cap.

In its third year, the Audit Committee Practices Report added a charitable element to the survey, allowing the first 200 qualifying respondents to select from <a href="https://braven.org/">Braven</a> and/or <a href="https://www.newprofit.org/">New Profit</a> for a $100 donation. This led to a total of $20,000 in donations, allocated per respondent selections.

<strong>About the Center for Audit Quality</strong>

The Center for Audit Quality (CAQ) is a nonpartisan public policy organization serving as the voice of US public company auditors and matters related to the audits of public companies. The CAQ promotes high-quality performance by US public company auditors; convenes capital market stakeholders to advance the discussion of critical issues affecting audit quality, US public company reporting, and investor trust in the capital markets; and using independent research and analyses, champions policies and standards that bolster and support the effectiveness and responsiveness of US public company auditors and audits to dynamic market conditions.

<strong>About Deloitte’s Center for Board Effectiveness</strong>

Deloitte’s Center for Board Effectiveness helps directors deliver value to the organizations they serve through a portfolio of high-quality, innovative experiences throughout their tenure as board members. Whether an individual is aspiring to board participation or has extensive board experience, the Center’s programs enable them to contribute effectively and provide focus in the areas of governance and audit, strategy, risk, innovation, compensation and succession.

<strong>About Deloitte</strong>
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including nearly 90% of the Fortune 500® and more than 8,500 US-based private companies. At Deloitte, we strive to live our purpose of making an <a href="https://www2.deloitte.com/us/en/pages/about-deloitte/articles/purpose-at-deloitte-us.html">impact that matters</a> by creating trust and confidence in a more equitable society. We leverage our unique blend of business acumen, command of technology, and strategic technology alliances to advise our clients across industries as they <a href="https://www2.deloitte.com/us/en/pages/about-deloitte/articles/technology-consulting-engineering-advantage.html">build their future</a>. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Bringing more than 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte’s approximately 457,000 people worldwide connect for impact at <a href="http://www.deloitte.com">www.deloitte.com</a>.

###

<strong>Contacts</strong>
<table>
<tbody>
<tr>
<td width="230">Kerry Lee</td>
<td width="262">Brad Jacklin</td>
</tr>
<tr>
<td width="230">Senior Manager, Public Relations</td>
<td width="262">Director, Communications</td>
</tr>
<tr>
<td width="230">Deloitte Services LP</td>
<td width="262">Center for Audit Quality</td>
</tr>
<tr>
<td width="230">+1 916-298-8031</td>
<td width="262">+1 202 494 9560</td>
</tr>
<tr>
<td width="230">kerlee@deloitte.com</td>
<td width="262">bjacklin@thecaq.org</td>
</tr>
</tbody>
</table>
&nbsp;

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see <a href="https://www2.deloitte.com/us/en/legal/about-deloitte.html">www.deloitte.com/about</a> to learn more about our global network of member firms.

Audit Committees Prioritize Cybersecurity, Enterprise Risk Management in New Survey

Transparency and accountability are pillars of effective public policy development. Unfortunately, the roundtable that the PCAOB held this week on its proposal related to company noncompliance with laws and regulations (NOCLAR) failed to live up to these principles. Specifically, the...

<span data-contrast="auto">Transparency and accountability are pillars of effective public policy development. Unfortunately, the roundtable that the PCAOB held this week on its proposal related to company noncompliance with laws and regulations (NOCLAR) failed to live up to these principles. Specifically, the roundtable failed to address the concerns outlined in 78% of the comment letters the PCAOB received, including from those investors, audit committee members, auditors, academics and others who are concerned with the PCAOB’s proposal. </span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-contrast="auto">“Today’s NOCLAR roundtable was a missed opportunity for the PCAOB to further understand the views highlighted in numerous comment letters from engaged stakeholders,” said Julie Bell Lindsay, Chief Executive Officer, CAQ. “Not only did the roundtable surface disagreement as to the actual scope or intention of the proposal, but we are concerned that the lack of diverse stakeholder representation – particularly from investors and audit committees, two important audiences – resulted in dialogue that did not meaningfully address stakeholder concerns. Given the discussion at the roundtable, we believe that the appropriate response is to re-propose the standard, with an economic analysis, to begin to address these concerns.”</span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

Statement on the PCAOB’s NOCLAR Roundtable Event

Statements

Anti-Fraud

The Center for Audit Quality (CAQ) supports the SEC’s vote to adopt a final rule that will bring clarity, consistency and comparability to company-reported climate information and will require assurance over certain aspects of this information. In adopting the final...

The Center for Audit Quality (CAQ) supports the SEC’s vote to adopt a final rule that will bring clarity, consistency and comparability to company-reported climate information and will require assurance over certain aspects of this information. In adopting the final rule, the SEC has recognized the valuable role that assurance plays in bringing accountability and objectivity to company-reported climate disclosures.

“While we are still digesting the final rules, the SEC took a step forward today in providing much needed clarity on the reporting of climate-related information by public companies,” said Julie Bell Lindsay, Chief Executive Officer of the CAQ. “Whether greenhouse gas emissions or the impact of climate issues in company financial statements, audit firms – with their deep understanding of company financial records, operations, business strategies and internal controls – stand ready to bring their independence and objectivity in providing assurance on this information.”

Statement of Support for the SEC’s Final Rule on Climate-Related Disclosures

Oh, the dog days of summer are coming to an end…no? No dog days for you? No, not really here either. Well, we can all agree that August is coming to an end and for many that marks the “end”...

<img class="aligncenter wp-image-13879" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2023/06/Header_AC-Insights_1200x400_600x200.png" alt="Audit Committee Insights" width="650" height="163" />

Oh, the dog days of summer are coming to an end…no? No dog days for you? No, not really here either. Well, we can all agree that August is coming to an end and for many that marks the “end” of summer with school back (or nearly back) in session. We know we are a broken record to emphasize the busy pace of things in Washington, DC, but the past few months are no exception. Read on to stay informed on recent developments for audit committee members.

We welcome input; please <a href="mailto:vteitelbaum@thecaq.org">let us know</a> what you think. Subscribe <a href="https://go.thecaq.org/l/834983/2020-04-22/fskb">here</a> so that you never miss an update from the CAQ.
<h2>What Audit Committees and Investors Want</h2>
<img class="size-full wp-image-15333 aligncenter" src="https://www.thecaq.org/wp-content/uploads/2024/08/2024_08_AC-Insights_600x200_Whats-ACs-Want.jpg" alt="" width="600" height="200" />

When it comes to evaluating audit firm and audit engagement performance, what do audit committee members and investors want? We sought to answer this question through two surveys of nearly 250 audit committee members and 100 investors.

Understanding the information needs of a broad range of investors and audit committee members when it comes to evaluating audit firms and audit engagement performance is important to establishing good public policy that addresses stakeholder needs.

Our key findings include:
<ol>
 	<li>More research is necessary to establish whether evidence supports the need for and benefits of proposed metrics.</li>
 	<li>Audit committees and many investors already have the information they need.</li>
 	<li>Any reporting should be voluntary.</li>
 	<li>Any changes to the PCAOB’s standards should promote auditor-audit committee discussion.</li>
 	<li>A majority of investors and audit committee members are of the view that the PCAOB’s auditing standards and rules have kept pace with change and require only targeted updating.</li>
</ol>
The findings from these surveys provide evidence as to the validity of the concerns raised by the CAQ and other commenters as to whether the PCAOB’s recent proposals will achieve the intended objective for investors and audit committees. These concerns include (1) the potential that publicly disclosed mandated metrics will have unintended consequences (and should therefore be voluntary) and (2) the stated benefits in each proposal’s economic analysis do not provide sufficient basis to justify their respective costs. As noted, there was disparity in what investors say would be helpful compared with what they are likely to seek out and audit committees say the information available to them to fulfill their external auditor oversight responsibilities meets most to all their needs. Accordingly, there should be further study and evaluation, including potential pilot testing, prior to adopting any final standard as the PCAOB’s stated value is not sufficiently supported by the expectations or needs of intended beneficiaries.

We provided the detailed results of both surveys to the PCAOB in <a href="https://www.thecaq.org/comment-letter-pcaob-fem-and-frp-supplemental-data-from-ac-members-and-investors">our supplemental comment letter</a>. You can find investor survey results <a href="https://www.thecaq.org/wp-content/uploads/2024/08/2024-July-PCAOB-Firm-Engagement-Metrics-KRC-Investors-Survey.pdf">here</a> and audit committee survey results <a href="https://www.thecaq.org/wp-content/uploads/2024/08/2024-July-PCAOB-Firm-Engagement-Metrics-AC.pdf">here</a>.
<h2>New CAQ Resource for Audit Committees: Oversight of GenAI</h2>
<img class="size-full wp-image-15331 aligncenter" src="https://www.thecaq.org/wp-content/uploads/2024/08/2024_08_AC-Insights_600x200_Oversight-of-GenAI.jpg" alt="" width="600" height="200" />

The rise of genAI is raising important questions about when and how to invest in appropriate technologies that may have an impact on the finance organization and the speed of transformation.

As genAI’s use in financial reporting processes and ICFR evolves, audit committees have an important role to play. Understanding the technology, being aware of how its use gives rise to new considerations in financial reporting processes and ICFR, and asking the right questions of management and the external auditor will be essential for audit committees to effectively exercise their oversight responsibilities.

Our new resource, <a href="https://www.thecaq.org/wp-content/uploads/2024/07/caq_ac-oversight-in-the-age-of-genai_2024-07.pdf"><em>Audit Committee Oversight in the Age of Generative AI</em></a>, provides an overview of genAI technologies and includes example questions for audit committees to ask management and the auditor.

Examples include:
<ul>
 	<li>Does the company have the requisite expertise to select, develop, deploy, and monitor genAI technologies?</li>
 	<li>Who (individual or group) in the company is responsible for oversight of the use of genAI?
<ul>
 	<li>Does the company have a process to track and monitor the use of genAI throughout the company, including use by third-party service providers?</li>
</ul>
</li>
 	<li>What is the experience of the audit engagement partner and other senior engagement team members with genAI technologies?</li>
 	<li>Does the company’s use of genAI technologies have a significant impact on the planned audit scope?</li>
 	<li>Not surprisingly, genAI has caught the eye of the PCAOB who published in July 2024, <a href="https://pcaobus.org/documents/generative-ai-spotlight.pdf?utm_medium=email&amp;_hsenc=p2ANqtz--gKnhkj7RW5R0b2Y3BmLDO3KcsyRxUQWfYAJGDcYJQ3OF34NXnkP6ZBuik4UM05vvEf5qpIc-D1lhzFGd4_oGw5TNIUQ&amp;_hsmi=316772091&amp;utm_content=316772091&amp;utm_source=hs_email"><em>Spotlight: Staff Update on Outreach Activities Related to the Integration of Generative Artificial Intelligence in Audits and Financial Reporting</em></a>. The PCAOB provides observations from staff outreach (not all inclusive):
<ul>
 	<li>Global network firms are further along in developing and deploying genAI-enabled tools than non-affiliated firms are.</li>
 	<li>Data privacy and data security continue to be areas of focus for firms.</li>
 	<li>Firms and preparers expect genAI to augment, but not replace, humans in auditing or in financial reporting.</li>
 	<li>The auditability of both the underlying source data (whether from public sources or confidential company information) and genAI-created content is important when genAI-enabled tools are used.</li>
 	<li>The use of genAI by preparers could amplify certain existing information technology risks (e.g., risks related to the segregation of duties), or create new risks.</li>
 	<li>You can also listen to our podcast – <a href="https://www.thecaq.org/podcast-capital-markets-pulse-episode-8">Episode 8 of Capital Markets Pulse</a> - with the CAQ’s Julie Bell Lindsay and EY’s Richard Jackson for more information. Julie and Richard discuss the promise of generative AI, and what the implementation of this technology by public companies means for governance as well as risks for accountants.</li>
</ul>
</li>
</ul>
<h2>PCAOB Posts 2023 Annual Inspection Report</h2>
The PCAOB this month released the results of inspections of all 2023 annually inspected firms, including the six U.S. global network firms. The data shows that deficiencies went up – but also shows positive signs when it comes to audit quality. The PCAOB said that while they identified more deficiencies in this round of inspections, the types of deficiencies identified represent more isolated incidents than in the past. Restatements resulting from inspections remain incredibly low - just three of 405 audits (0.74%) inspected in 2023 compared with two of 386 audits (0.52%) inspected in 2022.

The PCAOB’s inspections are one part of a strong reporting and oversight ecosystem and have a two-fold purpose: To help public company auditors improve the quality of their audits and to protect investors. In this blog, my colleague Dennis McGowan shares five guiding principles to keep in mind when reviewing inspection reports. And our CEO, Julie Bell Lindsay, explains why audit quality is trending in the right direction in this piece for Forbes.
<h2>ERM for Audit Committees</h2>
<img class="size-full wp-image-15330 aligncenter" src="https://www.thecaq.org/wp-content/uploads/2024/08/2024_08_AC-Insights_600x200_ERM-for-ACs.jpg" alt="" width="600" height="200" />

In our 3rd annual <a href="https://www.thecaq.org/audit-committee-practices-report-2024">Audit Committee Practices Report</a>, a collaboration with Deloitte, almost half (48%) of respondents indicated that Enterprise Risk Management - ERM - will be a top-three priority in the next 12 months. Interestingly, respondents were evenly split in terms of ranking ERM’s priority order—with 16% each ranking it as 1, 2, or 3. Compared to previous editions of the survey, ERM has consistently ranked among the top priorities.

When asked who was responsible for oversight of ERM within their organizations, 47% of respondents indicated the audit committee, 35% the board, and 15% the risk committee. Financial services companies are less likely to assign audit committees primary oversight responsibility for enterprise risk (23%) than companies in other industries (54%). Instead, 43% of financial services respondents delegated this responsibility to the risk committee. More than three-quarters (85%) of respondents report some level of enterprise risk experience/expertise on the committee. This could be an indication of a high level of confidence in their committees’ ability to oversee this area, as relatively few of those who stated a need for additional expertise prioritized ERM (20%).

We identified the following key insights for audit committees related to ERM:
<ul>
 	<li>To monitor the emergence of new risks, audit committees can adapt their models, starting by considering high-impact, low-likelihood risks alongside high-impact, high-likelihood risks. Such an approach is becoming ever more valuable given that events once deemed black swans—pandemics, large natural disasters and climate disasters, and global conflict—have become more prevalent.</li>
 	<li>Audit committee responsibility for ERM oversight may well have increased this year, owing to the introduction of new disclosure requirements in a variety of areas. That said, ERM oversight is not restricted to the audit committee—there is ample opportunity for the board to receive periodic updates, evaluate risk appetite, and identify new or emerging risks.</li>
 	<li>The audit committee has a role to play in advising management in identifying and monitoring material risks and seeing that they are brought to the attention of the full board and/or appropriate committee. Directors should encourage management to assess risks on a continuous basis, instead of relying on the outdated approach of conducting a risk assessment on an annual basis and setting it aside until the next year.</li>
</ul>
To dive deeper into ERM, we recently hosted a webinar with experts Brian Schwartz, Partner &amp; US Enterprise Risk Management Solutions Leader from PwC, and David Herzog, Audit Committee Chair of MetLife, Inc. (and member of the CAQ’s Audit Committee Council). If you missed it, check out the replay <a href="https://www.thecaq.org/event-enterprise-risk-management-for-audit-committees">here</a> and learn more about the importance of a company’s risk appetite statement, the relationship between ERM and Executive Compensation Risk, how to identify risks on three levels (including discussion of where reputation risk fits in? #spoileralert – it doesn’t; it’s an output not a risk per se) and much more.
<h2>ICYMI: CAQ Public Policy Technical Alert (PPTA), June / July 2024</h2>
Each month, the PPTA highlights and examines the regulatory, standard-setting, legislative, and broader financial reporting developments impacting the public company audit profession. The CAQ’s <a href="https://www.thecaq.org/ppta-june-2024">June</a> and <a href="https://www.thecaq.org/ppta-july-2024">July</a> 2024 Alerts included these featured articles.

<em><strong>SEC Appoints Erica Y. Williams to a Second Term as PCAOB Chairperson</strong></em>
The SEC <a href="https://www.sec.gov/news/press-release/2024-71">announced</a> the appointment of Erica Y. Williams to a second term as Chairperson of the PCAOB beginning on October 25, 2024, and running through October 24, 2029. Prior to joining the PCAOB in January 2022, Erica Y. Williams was a litigation partner with Kirkland &amp; Ellis LLP. She previously spent more than a decade in various roles at the SEC, including as Deputy Chief of Staff to three former SEC Chairs and Assistant Chief Litigation Counsel in the SEC’s Division of Enforcement trial unit.

<em><strong>Selective Disclosure of Information Regarding Cybersecurity Incidents</strong></em>
The SEC <a href="https://www.sec.gov/news/statement/gerding-cybersecurity-incidents-06202024">posted</a> a statement by Erik Gerding, Director, Division of Corporation Finance, ‘Selective Disclosure of Information Regarding Cybersecurity Incidents.’ Gerding reiterates the scope of Regulation FD. Last year, the Commission adopted rules requiring public companies to disclose material cybersecurity incidents under Item 1.05 of Form 8-K. Since then, staff in the Division of Corporation Finance have heard assertions that those rules may preclude a company from sharing additional information about a material cybersecurity incident with others, including their commercial counterparties.

<em><strong>PCAOB Seeks Nominations for Advisory Groups</strong></em>
The PCAOB <a href="https://pcaobus.org/news-events/news-releases/news-release-detail/pcaob-seeks-nominations-for-advisory-groups-2024">announced</a> that it is seeking nominations for members of its Investor Advisory Group (IAG) and Standards and Emerging Issues Advisory Group (SEIAG). Appointments are expected to be announced by the end of the year. Appointed members would serve from January 1, 2025, to December 31, 2026. The deadline for submissions is September 6, 2024.

<em><strong>Fighting Fraud: A Shared Responsibility</strong></em>
The CAQ in a blog post <a href="https://www.thecaq.org/aia-fighting-fraud-a-shared-responsibility">explored</a> what <em>Occupational Fraud 2024: A Report to the Nations</em>, released in March 2024 by the Association of Certified Fraud Examiners (ACFE) means for stakeholders with a responsibility for fighting fraud. This year’s ACFE report confirms that external auditors do identify fraud. It also confirms that companies with active and holistic programs to detect instances of fraud can minimize the duration and losses of fraud. All stakeholders can benefit from understanding the findings in the ACFE’s report and what it means for their role in fighting fraud.

<em><strong>IASB Proposes Illustrative Examples to Improve Reporting of Climate-Related and Other Uncertainties in Financial Statements</strong></em>
The IASB <a href="https://www.ifrs.org/news-and-events/news/2024/07/iasb-improve-reporting-climate-related-other-uncertainties-fs/">published</a> a consultation document, proposing eight examples to illustrate how companies apply IFRS Accounting Standards when reporting the effects of climate-related and other uncertainties in their financial statements. The IASB’s proposed examples aim to:
<ul>
 	<li>improve transparency of information in financial statements; and</li>
 	<li>strengthen the connection between financial statements and other parts of a company’s reporting, such as sustainability disclosures.</li>
</ul>
The eight illustrative examples focus on areas such as materiality judgements, disclosures about assumptions and estimation uncertainties, and disaggregation of information.  The comment period is open until November 28, 2024. The IASB will consider stakeholder feedback and decide whether to proceed with the proposed illustrative examples to accompany IFRS Accounting Standards.
<h2>Inspiration from Paris 2024</h2>
<img class="size-full wp-image-15332 aligncenter" src="https://www.thecaq.org/wp-content/uploads/2024/08/2024_08_AC-Insights_600x200_Paris-2024.jpg" alt="" width="600" height="200" />

It’s hard not to be inspired by the Olympics after two amazing weeks of athletic feats. What were your favorite moments? There are too many to count to be sure. While the medal count was often in the news (Go Team USA!), the human stories and achievements went far beyond the hardware. We mere mortals marvel at the heights reached by <a href="https://www.youtube.com/watch?v=YBJwGCu6Nc0">Swedish pole vaulter Mondo Duplantis</a> (over 20 feet!!) and <a href="https://www.youtube.com/watch?v=E2g7tlr6ZX4">Simone Biles</a> on floor (nearly 12 feet!!). They defy gravity. Or the speed and grace of track stars (<a href="https://www.nbcnewyork.com/paris-2024-summer-olympics/noah-lyles-100m-final-photos-finish-line/5669315/">the photo finish</a> of Noah Lyles in the 100 meters! The amazing <a href="https://www.youtube.com/watch?v=9n5qEKIW5DQ">come from behind victory of Quincy Hall</a> in the 400 meters! The domination of the US women in the <a href="https://www.youtube.com/watch?v=Ytg5MUQECm4">4x400 meter relay</a>!) One relatable Olympic moment came from Irish swimmer Daniel Wiffen who won gold in the Men’s 800-meter freestyle event. After competing and finishing 18th in the 10K Open Water Swim (yes, 6.2 miles of swimming…) he <a href="https://www.youtube.com/watch?v=wXL5kmvH3DM">said with a smile</a>, “It was probably one of the worst things I’ve ever done… I wanted to do it because my friends were doing it.” Been there. Congratulations to all the Olympians!

&nbsp;

<hr />

<strong><em>Questions and comments about Audit Committee Insights can be addressed to Vanessa Teitelbaum, Senior Director, Professional Practice (</em></strong><a href="mailto:vteitelbaum@thecaq.org"><em>vteitelbaum@thecaq.org</em></a><strong><em>).</em></strong>

This newsletter is intended as general information and should not be relied upon as being definitive or all-inclusive. The CAQ encourages readers to refer to applicable rules, standards, guidance, and other resources in their entirety. All entities should carefully evaluate which requirements apply to their respective organizations.

Audit Committee Insights | July/August 2024

Newsletter

In our letter we detail our views on the following:

 	Support for modernizing AS 2305 with principles-based requirements.
 	Importance of risk assessment and professional judgment in designing and performing substantive analytical procedures.
 	Specific feedback, including:

 	More clearly defining the term...

In our letter we detail our views on the following:
<ol>
 	<li>Support for modernizing AS 2305 with principles-based requirements.</li>
 	<li>Importance of risk assessment and professional judgment in designing and performing substantive analytical procedures.</li>
 	<li>Specific feedback, including:
<ol type="a">
 	<li>More clearly defining the term “company’s amount” within the Proposed Standard to better differentiate the term from other recorded balances and company-prepared information.</li>
 	<li>Removing the maximum threshold of tolerable misstatement for evaluating differences between the auditor’s expectation and the company’s amount.</li>
 	<li>Eliminating the requirement to examine relevant information from external sources when the company’s account or disclosure depends on information the company received from one or more external sources.</li>
</ol>
</li>
</ol>
Read the full comment letter <a href="https://www.thecaq.org/wp-content/uploads/2024/08/caq_comment-letter-to-pcaob_substantive-analytical-procedures_2024-08.pdf">here</a>.

Comment Letter | PCAOB Substantive Analytical Procedures Proposal

Academics

Comment Letter

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