A new tool from the Center for Audit Quality will help audit committees assess management’s presentation outside of audited financial statements of performance measures that do not comply with Generally Accepted Accounting Principles. The 8-page, quick read is meant to assist audit committees in determining whether non-GAAP indicators provide investors with meaningful financial information.

Management use of non-GAAP measures to explain the business to investors is not explicitly prohibited by any regulator, but the Securities and Exchange Commission provides rules to assure they are not used to obscure the truth. The use of non-GAAP measures has amped up in recent years, prompting the SEC to issues stern warnings to companies to assure their use has not gotten out of hand.

“Concerns and questions from regulators and investors have grown around the use of non-GAAP measures in communications such as regulatory filings and press releases,” said Cindy Fornelli, executive director of the CAQ, in a statement. “This tool can help audit committees probe whether such measures are accurate, appropriate, and useful to investors.”

The suggested questions for audit committees to explore focus on how transparent the non-GAAP measures are that a company is using, how consistently the measures are used, and whether they are comparable to GAAP measures. Those are the same criteria the SEC focuses on in its guidance to companies.

With respect to transparency, for example, the CAQ tool suggests ways audit committees can consider the purpose, prominence, and labeling of non-GAAP information. Giving non-GAAP measures greater prominence would be considered misleading to investors under SEC guidelines.

In terms of consistency, the tool suggests ways audit committees can question management to determine whether non-GAAP measures are consistent and balanced. If a company were to use a measures, for example, that affects revenue but not expenses, or vice versa, that might pose concern for the audit committee.

The tool also suggests some procedural questions for audit committees to explore to understand who is responsible for overseeing non-GAAP measures, whether legal counsel is involved, what information is used in calculations and how well controlled that information is, and others.