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Consider the following factors when casting your vote for or against the ratification of the outside auditors at a company. For further information about specific factors, go to our individual pages using the navigation to the left.
Download the Auditor Checklist here.
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Factor
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Rationale
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Vote Recommendation
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How long has the outside auditor worked for the company?
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Regular rotation of outside auditors ensures a fresh perspective and forces a review of the financial reporting framework. We believe that auditors should be rotated every 5 years.
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If the outside auditors have been in place for more than 5 years, vote against ratification.
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Are the auditor’s non-audit fees more than 10% of the value of its audit fees?
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The outside auditors should not have any potential conflicts of interest when doing business with the company. Excessive non-audit work can create such conflicts by inducing the audit firm to avoid making problems for the company and risking the other work. The auditor should not make more than 10% of the value of the audit fees in non-audit fees,
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If the outside auditor’s non-audit fees exceed 10% of the value of the audit fees received, vote against the ratification.
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| Was the former outside auditor replaced or resigned unexpectedly? |
When an outside auditor resigns or is replaced unexpectedly, it is important to determine why this occurred. If there were disagreements between the auditing firm and the company or the audit committee, try to determine from the proxy statement what led to the departure of the auditor. |
If you cannot determine why the outside auditor departed from the company or the answer is unsatisfactory, vote against ratification of the auditing firm. |
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