WASHINGTON, DC - Tthe Center for Audit Quality (CAQ) released on March 16, 2018, a new publication designed to help audit committees enhance their oversight of non-GAAP measures used by company management.
Presenting themes that emerged at a series of multi-stakeholder roundtables, Non-GAAP Measures: A Roadmap for Audit Committees provides a set of key considerations for audit committees, including leading practices to assess whether a company’s non-GAAP metrics present a balanced representation of the company’s performance. GAAP information serves as a foundation for confidence in financial statements, but financial statement users also value non-GAAP financial measures, when presented appropriately.
In addition to the roadmap, the CAQ released a companion video featuring interviews with audit committee chairs that provides additional context and real-life examples of how audit committees are thinking about and overseeing non-GAAP measures.
Among other recommendations, the CAQ suggests that the audit committee:
Put itself in the shoes of investors when evaluating if the non-GAAP measures and related disclosures presented align with the company’s overall strategy and performance. Ask management whether it has an internal policy that provides guidelines for determining how non-GAAP measures are generated, calculated, and presented.
Discuss with management how the company makes changes to the non-GAAP measures it presents and the rationale for why it would or would not make changes. Ask the company to compare or benchmark its non-GAAP measures to its peers. Leverage external auditors as a resource when evaluating non-GAAP measures.
Review the publication on the CAQ's website:
https://www.thecaq.org/non-gaap-measures-roadmap-audit-committees.
