Insights from KPMG’s 9th Annual Audit Committee Issues Conference
Economic and political uncertainty, the impact of government regulation and public policy initiatives, and ensuing that the company’s strategy keeps pace with a fast-changing business and risk environment are among the challenges facing companies and board agendas in 2013.
Highlighted below are perspectives on audit committee challenges:
Ensuring financial reporting integrity and reinforcing audit quality.
The continuing economic volatility and uncertainty requires the audit committees to stay vigilant in their oversight of financial reporting and disclosures. Key areas of continued focus would be fair value estimates and impairment, understanding management’s assumptions underlying critical accounting estimates. In light of focus on cost reduction and pressure to grow the business to meet targets, earnings quality would be another issue that will confront audit committees.
Strengthening the global lens and assessing international strategy.
Critical areas of focus for boards with international operations include talent management and succession planning, the risks posed by the complexities of global operations, and maintaing a “non negotiable set of values” while at the same time valuing the local culture.
Focusing on risk management and improving information quality.
Are the important issues to management being raised at the board and audit committee levels? was one of the concerns. “It’s clear from the conference dialogue that now is a pivotal time for boards to take a hard look at how they allocate risk oversight responsibilities to make sure everything is covered and appropriately balanced among committees,” said Dennis T. Whalen, Partner in Charge & Executive Director of KPMG’s Audit Committee Institute. Having the ‘right risk culture’ was noted as important for a robust risk management program. Management should be able to present the most pertinent information succinctly and in two or three pages, not in fifty. Certain companies try to feed irrelevant information to audit committees so that they will be over whelmed by it and not have time to focus on the important areas.
Anticipating a robust enforcement environment going forward
The growing volume and scope of government and related regulations on companies and the increased levels of civil prosecutions will require a strong enforcement/compliance culture with oversight from audit committees. The challenge would be to getting it right rather than being buried by them.
However, 68% of participants at international level recognized that the audit committee’s workload is reaching a tipping point due to the range of risks currently requiring their oversight! General realization is that, “An overloaded audit comittee is an under-performing audit committee.”