COVID disclosures, extra risks top audit committee agendas for 2021

Audit committees will have fuller plates than usual in the coming year, according to Big Four firm KPMG, managing agendas packed with new risk management responsibilities amid the fallout from the coronavirus pandemic and other crises of 2020.

In a recent report, KPMG’s Board Leadership center identified seven key issues that audit committees will be grappling with. To start, the report noted than more than 60 percent of audit committee members surveyed said that COVID-19 has prompted them to reassess the scope of their agenda and their risk management responsibilities.

“Keeping the audit committee’s agenda focused will require vigilance,” the report noted. “Virtually all companies will continue to deal with significant disruption and uncertainty … . Does the audit committee have the time and expertise to oversee the major risks now on its plate?”

Also high on the list was monitoring the financial reporting and disclosure impacts of COVID-19. Only this month, the Securities and Exchange Commission settled charges against Cheesecake Factory for misleading COVID-19 disclosures, leading to a fine of $125,000, a first for coronavirus-related reporting. (See story.)

The other five key issues for audit committees include:

• Maintaining audit quality and understanding COVID-19’s impact on the external audit process.
• Working with management on ESG/sustainability reporting.
• Understanding the impact of technology on the finance organization.
• Keeping internal audit focused on critical risks.
• Improving their organization’s ethics, compliance and whistleblower programs.

In a separate report, the KPMG Board Leadership Center identified the top issues for corporate boards as a whole. Among them:

• Focusing on management’s response to the pandemic, without losing sight of the bigger picture.
• Prioritizing human capital management and CEO succession.
• Pushing companies to do more to combat systemic bias and racism.
• Evaluating their company’s focus on ESG and corporate purpose.
• Reassessing their company’s readiness and resilience plans.
• Taking a “data governance” approach to cybersecurity and data privacy.