Boosting the audit committee: financial executives, particularly CFOs, have a major part to play in improving the performance of a company's audit committee. That's especially true for improving processes, enabling relevant technology and defining key roles.

• Author: Flanagan, Thomas P.
• Position: AUDIT - Statistical table

Sitting on an audit committee is not what it used to be. Today's committees face expanding responsibilities, increasing demands, growing complexity and shifting regulatory and reporting requirements. These factors can jeopardize the effectiveness of the committee--and even erode people's willingness to serve as members by knocking the reward and responsibility picture out of balance.

Yet having an effective audit committee is critical in meeting the organization's governance, compliance and performance needs. The audit committee's ability to carry out its oversight responsibilities--overseeing the company's financial statements, legal requirements, independence issues and so on--is of great importance to the organization and should be of great concern to finance professionals, including CFOs, controllers and chief audit executives. As such, finance leaders need to carefully consider current committee challenges that could undermine organizational success and then determine how best to help.

With the regulatory and reporting realities associated with Sarbanes-Oxley Act requirements, including New York Stock Exchange and Nasdaq rule changes, audit committee members must now address heightened exposure to liability, increased risk of restatements and additional "must dos." Ongoing challenges related to lengthy meetings, escalating workloads and last-minute preparation continue to threaten committee effectiveness. Such board-level issues should not be ignored by the organization or its finance professionals--especially when prompt attention to these matters could stave off potential risks. Practical solutions to these challenges are within reach.

As committees struggle to address increasing responsibilities and seek support, resources and guidance to help fulfill their duties, finance leaders are presented with an opportunity to play a key role in strengthening their audit committees.

Proactive involvement from finance leaders would also support the effectiveness of the larger organization by demonstrating a commitment to leading practices at all levels of the company. Furthermore, serving as a catalyst in boosting audit committee effectiveness could certainly help enhance one's professional standing in the organization.

So, how can finance professionals help audit committees become more effective?

Stepping Up

As a key link between management (the C-suite executives) and the audit committee chair, finance leaders are ideally positioned to raise committee effectiveness through initiating and suggesting key improvements--especially around pre-work and meeting preparation.

As liaisons bridging various areas of the organization, finance leaders can play the role of evangelist, emphasizing the importance of a well-prepared committee that has efficient and insightful meetings; at the same time, they can...