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ARTICLE · 28 SEPTEMBER 2016

Questions About Non-GAAP Measures For Audit Committees

Brown Smith Wallace
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The Center for Audit Quality — an autonomous, nonprofit public policy organization composed of accounting professionals — has compiled a checklist of possible questions for audit committees...

United StatesAccounting and Audit
Daniel J. Ward, CPA
Daniel J. Ward, CPA
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The Center for Audit Quality — an autonomous, nonprofit public policy organization composed of accounting professionals — has compiled a checklist of possible questions for audit committees to ask management and external auditors before using non-GAAP metrics. Here are 11 of its questions that address the transparency of non-GAAP disclosures:

  1. What's the purpose of the non-GAAP measure, and would a reasonable investor be misled by the information?
  2. Has the non-GAAP measure been given more prominence than the most comparable GAAP measure?
  3. How many non-GAAP measures have been presented, and are they all necessary and appropriate for investors to understand performance?
  4. Why has management selected a particular non-GAAP measure to supplement GAAP measures that are already established and consistently applied within its industry or across industries?

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