More responsibilities, more risks, more compliance issues, along with a host of formal and procedural duties ... no surprise, then, that this can be the most difficult committee role to fill.
The role of audit committee chair today may fairly be called the hot seat. The role has always been demanding, typically requiring more time than any other committee assignment and encompassing a broader range of responsibilities. Audit committees meet more frequently than other board committees, spend additional time with external auditors, and work closely with the CFO and key financial leaders. But over the past five years, the responsibilities have continued to multiply and the pressures on the audit committee and its chair have greatly intensified.
Consider risk oversight. The New York Stock Exchange, for example, has long required that the audit committee of listed companies "discuss guidelines and policies to govern the process by which risk assessment and management is undertaken." Although the NYSE doesn't require the audit committee to be solely responsible for risk oversight, many boards of companies that are not in heavily regulated industries lack board-level risk committees. And even where there is a separate risk committee, the audit committee must still coordinate with it to make sure that risk is being fully addressed.
Meanwhile, the risks--especially operational risks--have proliferated and grown in seriousness. Since the massive computer breaches at a number of major companies in 2014 and after, cybersecurity has loomed larger than ever on audit committee agendas. Third-party risks related to such issues as the environment, corporate reputation, labor practices, bribery, and more have also come to take up more of the time of many audit committees.
At the same time, audit committees and their chairs face increasing responsibilities for oversight of reporting, compliance, and controls. And the increased public focus on those responsibilities increases the risk of lawsuits, SEC fines and other penalties, as well as the risk to the reputations of directors. Audit committees also face increasing pressure from regulators, institutional investors, and proxy advisory firms to increase transparency in their disclosures about how they exercise those oversight responsibilities. In December 2015, for example, the Public Company Accounting Oversight Board (PCAOB) issued new rules and amendments to its auditing standards intended to provide...