Audit committees are confronting another challenging year, with continued economic uncertainty, globalization, digitization, and increased government regulation and enforcement reshaping the business and risk environment, according to a report from KPMG.
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The "Audit Committee Priorities for 2013" report advises audit committee members to remain focused on financial reporting integrity and internal controls, while addressing other key risks and oversight responsibilities that will require thoughtful, prioritized agendas.
"The audit committee's agenda is not getting any lighter," said KPMG Audit Committee Institute partner-in-charge and executive director Dennis T. Whalen in a statement. "Considering the scope and complexity of the risks and issues audit committees are facing, it's important to pause and reflect on what the committee's agenda should look like and how that agenda is carried out."
The report recommends that audit committee members reinforce audit quality and set clear expectations for the external auditor. The Public Company Accounting Oversight Board recently released a standard on how audit committees should communicate with outside auditors, and the standard has been approved by the Securities and Exchange Commission (see SEC Approves Standard on Audit Committee Communications).
Audit committee members should also monitor the impact of the business and regulatory environment on the company's compliance programs. In addition, the audit committee needs to understand the company's significant tax risks and how they are being managed. Members of the committee should also make sure internal audit is properly focused and fully utilized.
Beyond these key oversight responsibilities, audit committees also can play an important role in supporting the board, and coordinating with other board committees, on a number of corporate governance matters. They should consider whether the board has the right composition and committee structure to provide effective risk oversight. Audit committee members also need to understand how digitization and social media are transforming the business landscape—and impacting the company and board oversight. The audit committee also needs to set the tone and closely monitor corporate leadership's commitment to that tone, as well as the culture throughout the organization globally.