Audit committee priorities for 2013: KPMG's annual spotlight on what should be top of mind and top of agenda for audit committee members.

• Author: Whalen, Dennis T.
• Position: FOCUS ON THE AUDIT COMMITTEE

THIS YEAR, audit committees will face a host of governance challenges as economic uncertainty and political turbulence, globalization, digitization, increased government regulation and stepped-up enforcement continue to reshape the business and risk environment.

To help audit committees and boards rise to the challenges of the year ahead, we highlight key issues in "KPMG's Audit Committee Priorities for 2013" that should be top-of-mind for every audit committee. including "core" responsibilities and broader governance matters in which audit committees can play an important role in supporting the board.

How these issues fit into your committee's agenda, of course, depends on how your company or industry is affected by each trend. But one notion has become clear: focused, yet flexible agendas--and exercising judgment about what belongs and does not belong on the agenda, and when to take deep dives--will be critical.

* Stay focused on job No. 1: Financial accounting and reporting and internal controls. The noise in the room surely has escalated with ongoing public policy initiatives, debates on healthcare and tax reform, and new accounting standards. Still, the audit committee needs to stay focused on Job 1, particularly with respect to monitoring fair value estimates, impairments, and management's assumptions underlying critical accounting estimates. Are all financial communications consistent with regulatory filings? Do the CFO and finance organization have all the resources they need to succeed? Remember: financial reporting quality starts with management.

* Reinforce audit quality and set clear expectations for the external auditor. Audit quality is enhanced by an engaged audit committee that sets the tone and expectations for the external auditor and then monitors auditor performance through frequent, quality communications and a rigorous performance assessment. Also, pay close attention to PCAOB initiatives on audit quality and auditor independence, and consider how the audit committee can strengthen its oversight.

* Monitor the impact of the business and regulatory environment on the company's compliance programs. Global supply chains and emerging technologies have made companies more vulnerable than ever to fraud, misconduct, and compliance risk. Take these in to account for all growth initiatives, including new business partnerships. Ensure that the company's regulatory compliance and monitoring programs are adhered to throughout the...