Heads Up — Auditor evaluation tool for audit committees

Published on: 19 Oct 2012

Download PDFOctober 19, 2012
Volume 19, Issue 28

by Lyndsey McAlister and Karen Wiltsie, Deloitte & Touche LLP

On October 15, 2012, a group of leading governance organizations released an 11-page tool, Audit Committee Annual Evaluation of the External Auditor, to help audit committees evaluate their external auditor as part of the annual reappointment process.

The following organizations contributed to the tool: the Association of Audit Committee Members, Inc.; the Center for Audit Quality (CAQ); Corporate Board Member, an NYSE Euronext company; the Independent Directors Council; the Mutual Fund Directors Forum; the National Association of Corporate Directors; and Tapestry Networks.

The press release on the CAQ’s Web site states that “[t]he assessment tool is the first outcome of an ongoing collaboration that will allow the participating organizations to leverage their separate efforts to expand access to useful tools and materials with the objective of strengthening audit committee performance and transparency.”

Editor’s Note: The audit committee is directly responsible for selecting, compensating, and overseeing the work of independent outside auditors. Deloitte believes that a strong audit committee supports high-quality independent audits, and we welcome candid and timely feedback from the audit committee to help us continually enhance the quality of the service we perform. Deloitte supports the evaluation tool because we believe it will assist the audit committee in fulfilling its important responsibility to evaluate the independent auditor.

Description of the Auditor Evaluation Tool

This auditor evaluation tool suggests both formal and informal approaches for audit committees to use in evaluating their external auditors and includes sample questions. Though not exhaustive, the questions are a good starting point and can be adjusted for individual companies as appropriate. The questions cover the following topics related to audit quality:

  • “Quality of services and sufficiency of resources provided by the auditor.”
  • “Communication and interaction with the auditor.”
  • “Auditor independence, objectivity and professional skepticism.”

In addition to performing their own assessment, audit committees often solicit feedback from company personnel to gain insight into the external auditors; the tool includes a sample form for this purpose. This form covers the same three topics as those above and allows company personnel to make recommendations for improving audit quality.


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