The Center for Audit Quality (CAQ) has released a new tool for audit committees to assist in reviewing performance metrics that fall outside of audited financial statements and do not conform to Generally Accepted Accounting Principles (GAAP).
Outside the audited financial statements, company presentation of measures that do not follow Generally Accepted Accounting Principles (GAAP) has increased in recent years. While non-GAAP measures can be useful to enhance analyst and investor understanding of a company and its performance, care must be taken to foster compliance with the regulations and guidance from the Securities and Exchange Commission (SEC). The SEC has established regulations specific to the presentation of non-GAAP measures in SEC filings and other company communications to investors, such as earnings releases.
Concerns and questions from regulators and investors have grown around the use of non-GAAP measures in communications such as regulatory filings and press releases. This tool can help audit committees probe whether such measures are accurate, appropriate, and useful to investors.
The audit committee tool groups its questions under three core categories: Transparency, Consistency, and Comparability. Don’t miss this resource: