'More intense' oversight creates an inflection point: in the wake of the financial crisis CFOs and senior management need to understand the sea change in governance to be responsive to the audit committees' need for greater vigilance and increased focus and intensity on the business and management of organizations.

• Author: Keizer, Henry R.
• Position: AUDIT COMMITTEES

One result of the recent financial crisis is clear: audit committee oversight processes are changing. In a recent survey by KPMG's Audit Committee Institute and the National Association of Corporate Directors, 88 percent of audit committees said the financial crisis has "caused their board/audit committee to change the nature and scope of its oversight processes."

This fifth annual Audit Committee Member Survey was conducted between November 2008 and January 2009.

In a separate survey--conducted in February-75 percent said the audit committee's hands-on involvement has increased, with 12 percent saying it has increased to a great extent.

In short, oversight is very different from what it was just a year ago, and this change is likely to be felt by management and--in particular--chief financial officers and Finance teams, well after the recession ends.

Just as the economic crisis and unprecedented uncertainty have put companies and their management teams under tremendous stress--requiring fundamental changes to strategies and operations--boards and audit committees are responding to the gravity and urgency of the situation with greater vigilance and increased focus and intensity.

Whether it's the nature of the board's executive sessions or the audit committee's review of disclosures and earnings releases, this more intense level of oversight marks an inflection point for corporate governance.

Also it goes to the heart of what boards say they need to be effective in their oversight role: quality, timely information; a solid understanding of the business; healthy, productive discussions about risk; and confidence in the company's management team.

Management needs to understand this sea change in governance to be responsive to the board's needs and expectations. They also need this understanding to benefit from the board's insights and the more rigorous oversight processes that boards are insisting on to weather the crisis and promote an organization's long-term value.

Renewed Focus on the 'Basics'

Suggesting that they might have been overly focused on "process" in recent years, a number of audit committee members attending the KPMG Fifth Annual Audit Committee Issues Conference reported a renewed focus on the "basics" of oversight. The session was held in February along with the National Association of Corporate Directors and law firm Weil, Gotshal & Manges LLP.

This new focus among audit committee members has important implications for...