Fostering Constructive Dialogue with the External Auditor

A structured annual evaluation of the external auditor helps audit committees maintain audit quality, safeguard market confidence, and bolster communication between both parties.

By conducting a disciplined assessment of the external auditor’s independence, technical proficiency, and overall performance, audit committees reinforce a critical safeguard. A high-quality audit is a shared responsibility that depends on robust, constructive dialogue between the external auditor and the audit committee. 

“The evaluation and the appointment of the external auditor is one of the audit committee’s key responsibilities and it's important to follow a consistent process year over year,” said Sara Grootwassink Lewis, a board member at Weyerhaeuser Co., Freeport-McMoRan, PwC, and Healthpeak Properties, and a Center for Audit Quality (CAQ) Audit Committee Council member, at a November 2025 webinar on the topic. As such, implementing a formalized assessment is an effective way to facilitate essential conversations and an important tool in establishing a consistent review process. 

Having a Constructive Dialogue 

The assessment is a powerful source of constructive feedback and should encompass the following four domains to ensure the evaluation is comprehensive and addresses the core drivers of audit quality: 

• The engagement team. Assess the expertise, depth, and efficiency of the specific audit team.
• The audit firm. Evaluate the firm’s approach to promoting and monitoring overall audit quality.
• Communication and interaction. Review the effectiveness, timeliness, and transparency of communications with the audit committee.
• Independence and professional skepticism. Ensure that the external auditor maintains an unwavering position of independence, which is vital for investor confidence.

The Keys to Partnership

The quality of the audit is directly tied to the strength of the relationship between the external auditor and the audit committee. While the annual assessment is important, effective auditor–audit committee relationships rely on communication that extends well beyond the annual cycle. One of the most critical elements is having a proactive audit partner, or someone who reaches out as an issue emerges rather than waiting for the next scheduled touchpoint. 

“As long as it’s not in the rough, I can accept that. But the audit committee needs to know if it wasn’t right down the middle of the fairway. You need to talk about those things that might kick it over into the rough. We, as audit partners, need to have the courage to take a point of view. And we shouldn’t surprise management with that point of view,” said Stephen Parker, an assurance partner in PwC’s Governance Insights Center, on the webinar.

It is also important to maintain connections with the firm’s broader leadership, not just the core audit team. This broader engagement brings visibility into emerging and evolving issues, supports stronger judgment, and reinforces a culture of openness. Ultimately, these relationships work best when built on a foundation of transparency and consistent, candid communication.

Key operational practices that can help strengthen this important partnership include:

• Going beyond the meeting. Communication should extend beyond the quarterly meetings of the audit committee.
• Starting engagement partner succession planning early. It is important to start the partner selection process well before the required five-year rotation. As Karen Golz, audit committee chair at Analog Devices and iRobot Corp., noted on the CAQ webinar, this process should begin “approximately 18 to 20 months before the lead engagement partner is required to rotate off the engagement,” and the audit committee should ask for “a minimum of three qualified candidates.” It is also important that “the firm does not select the partner,” and that “the audit committee selects the partner,” she said.
• Addressing sensitive topics. When facing complex or sensitive issues, the audit committee can expect the audit partner to be candid.

Ultimately, audit committees should view the external auditor as a strategic partner. The real value of the engagement comes from the quality of insights the auditor provides and the benefits of an independent perspective that helps the committee make more informed decisions and improve overall efficiency.

By fully embracing a structured, continuous, and constructive assessment process, audit committees can strengthen their governance role, fulfill their fiduciary duty, and ensure the highest levels of audit quality, thereby enhancing confidence in the capital markets. This work is more important than ever, especially as the technological landscape continues to change how organizations operate.

As Mike Seelig, a former director at the Federal National Mortgage Association, said on the CAQ webinar, “the annual evaluation of the external auditor is a cornerstone of good corporate governance.” It is a process that experienced audit committees take seriously, understanding that the auditor’s independence and performance are critical elements of investor confidence and capital market strength. 

The views expressed in this article are the author's own and do not represent the perspective of NACD.

The Center for Audit Quality is an NACD partner, providing directors with critical and timely information, and perspectives. CAQ is a financial supporter of the NACD.