The United Brotherhood of Carpenters’ Pension Fund (the “UBC Pension Fund”) recently announced that it once again will be advocating for enhanced auditor independence disclosures in proxy statements in 2017.  This letter-writing campaign, which commenced in 2013, resulted in the UBC Pension Fund sending letters to 91 Fortune 500 firms in advance of the 2016 proxy season.  For the 2017 proxy season, the UBC Pension Fund expects to send letters to about 75 companies starting next month. 

The UBC Pension Fund requests issuers to include the following in their audit committee disclosures:

  • confirmation that the audit committee:

    • is directly responsible for the appointment, compensation, retention and oversight of the independent auditor,

    • is responsible for negotiating the independent auditor’s fees, and

    • periodically considers whether there should be a rotation of the independent auditor,

  • the year the independent auditor was first engaged,

  • that the audit committee and its chairperson are directly involved in selection of the independent auditor’s lead engagement partner at the time of mandatory rotation, and

  • that the board of directors and audit committee believe the continued retention of the independent auditor is in the best interests of the company and its investors.

Mr. Durkin, director of corporate affairs at UBC Pension Fund, indicated that the results of the campaign to date have been promising, with 63 issuers agreeing to disclose all six items and 48 disclosing five of the requests.  A recently released report by the Center for Audit Quality and Audit Analytics seems to support that position.  CAQ’s joint report with Audit Analytics on auditor independence noted that an increased number of companies are providing voluntary, enhanced disclosures around the oversight of independent auditors as compared to the prior two years of its study.

Audit Committee Transparency Barometer: