Audit committees deal with post-financial crisis challenges: navigating the post-financial crisis environment may prove almost as challenging as the crisis itself.

AuthorLiddy, Jim
PositionQUICK STUDY

Risk management continues to be a major challenge for companies in the global marketplace as they face increasing complexity and volatility and manage extended supply chains and organizations. Also, new compliance and business challenges are on the horizon due to expected increased regulatory changes.

These are based on discussions and survey results from 1,500 directors and executives who attended KPMG LLP's recent 27-city Audit Committee Roundtables Series. The following issues--cited as high on audit committee agendas--can help financial leaders focus their resources and talent in the near future.

Accounting Changes

The Financial Accounting Standards Board is scheduled to issue final accounting standards by June in a number of areas: leases, revenue recognition, financial instruments and fair value measurement. These and others will bring profound change to U.S. generally accepted accounting principles and the way companies and investors report and interpret corporate financial statements. In preparation for implementation, audit committees are:

* Staying close to where the projects are headed and the timelines; and

* Taking inventory of the major projects that will impact the company over the next several years, and understanding the impact on its financials as well as considering implementation requirements (people, cost and technology) and financial expertise/educational needs.

Dodd-Frank--Whistleblower and Clawbacks

Boards are focusing on a number of corporate governance provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act--including proxy access, say-on-pay and various executive compensation and leadership disclosures. The act's whistleblower incentives and protections and its incentive compensation clawback provisions are garnering additional scrutiny by audit committees.

Whistleblower. The act's whistle-blower provisions offer incentives for whistleblowers to report suspected wrongdoing directly to the SEC in exchange for cash rewards of 10 to 30 percent of certain sanctions collected by the SEC in excess of $1 million.

A concern is that this bounty program could encourage employees to bypass internal corporate processes for reporting suspected wrongdoing, potentially reducing the effectiveness of the company's compliance programs. Thus, companies may need to "revitalize" existing processes and reassess their compliance programs more generally.

Clawbacks. The act's incentive compensation clawback...

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