Audit committees focusing on emerging risks like AI

• Key insight: Find out how audit committees are shifting their oversight focus to emerging technology risks.
• What's at stake: Committee members are tasked with managing fast-moving technology risks, but without the necessary technical expertise.
• Expert quote: "Audit committees are entering a new era of oversight..." — Krista Parsons, Deloitte
  

Audit committees are increasingly looking at growing risks such as artificial intelligence, according to a new report.

The survey, released Tuesday by Deloitte and the Center for Audit Quality, found that 54% of audit committees say they have become more focused on emerging risks over the past year. But while AI oversight is growing, readiness among the committee members is still in the process of development. The audit committee's share of primary responsibility for AI governance grew from 20% to 29% in the latest annual survey by Deloitte and the CAQ, while 82% of committees overseeing AI governance describe their oversight as emerging or limited. 

Courtesy of the Center for Audit Quality

Technology skills have begun increasingly important as well, with 70% of the 248 survey respondents from audit committee chairs and members citing technology, including AI, as a skill that would enhance committee effectiveness, compared with 45% for cybersecurity and 27% for enterprise risk management.

"Audit committees are entering a new era of oversight — one defined by fast-moving risks and an expanded agenda," said Krista Parsons, audit committee program leader at Deloitte's Center for Board Effectiveness, in a statement. "The committees that are likely best positioned to lead through that change are not just identifying what is emerging; they are clarifying responsibilities, strengthening communication and building the capabilities needed to keep pace with change."

Most audit committees (82%) overseeing cybersecurity feel confident in their ability to provide oversight. But the rapidly changing cybersecurity landscape requires sustained attention as committees work to keep pace with the evolving risk profile. Seventy-five percent of respondents identified AI governance as a top three priority, up significantly from 35% last year's survey.

However, only 56% of respondents indicated they felt confident in their audit committee's ability to effectively oversee AI governance. Higher-quality discussion and challenge in meetings ranked as the top-rated opportunity to enhance audit committee effectiveness, cited by 41% of respondents. 

"The audit committee's core responsibility remains oversight, but the environment around that responsibility continues to evolve," said Vanessa Teitelbaum, senior director of professional practice at the CAQ, in a statement. "As risks grow more interconnected and new areas of focus emerge, audit committees must regularly evaluate whether they have the structure, expertise and engagement needed to fulfill that role effectively."

The top overall response for what audit committees value most when assessing the quality and performance of the independent auditor was engagement team leadership, experience and continuity.

Introductory bullet points created by AI with editorial review