Article

CAQ Report to Help Audit Committees with Non-GAAP Oversight

March 29, 2018

In its new report, Non-GAAP Measures: A Roadmap for Audit Committees, the Center for Audit Quality (“CAQ”) offers oversight guidance to audit committees concerning financial measures outside of U.S. Generally Accepted Accounting Principles (“GAAP”). The CAQ advises audit committees to take the following actions with companies:

  • Evaluate whether the disclosed non-GAAP measures and related information support a company’s general strategy and performance.
  • Decide whether management’s internal policy features guidelines for defining how non-GAAP measures are created, calculated, and disclosed.
  • Talk with management about how a company decides to change non-GAAP measures it discloses and its rationale for making such changes.
  • Ask a company to compare its non-GAAP measures to competitors.
  • Use external auditors to assess non-GAAP measures.
  • Confirm with investors that the presented non-GAAP measures help them understand a company’s performance.

The CAQ report also recommends practices for reviewing whether a company’s non-GAAP metrics fairly reflect company performance.

Separate from its report, the CAQ has issued a companion video covering how audit committees are considering and managing non-GAAP measures.