The audit committee's full agenda for 2016: as its core agenda becomes more complex, so too are the new risks landing on the audit committees plate.

AuthorWhalen, Dennis T.
PositionON THE GOVERNANCE AGENDA

Prioritizing a heavy audit committee agenda is never easy, and 2016 will be particularly challenging given the level of global volatility and uncertainty--e.g., the geopolitical environment, commodity prices, interest rates, currency fluctuations, slowing growth in emerging markets--as well as technology advances disrupting established industries and business models. Drawing on insights from our latest surveys and interactions with audit committees and business leaders over the past 12 months, we've highlighted six items for audit committees to keep in mind as they consider and carry out their 2016 agendas:

Maintain (or regain) control of the committee's agenda.

This No. 1 item from last year holds true for 2016. In our 2015 Global Audit Committee Survey, nearly half of the 1,500 audit committee members who responded said it is "increasingly difficult" to oversee the major risks on the audit committee's agenda in addition to its core responsibilities (financial reporting and related internal controls, and oversight of internal and external auditors). Even in the absence of any new agenda items, the risks that many audit committees have had on their plates for some time--e.g., cyber security and IT risk, supply chain and other operational risks, legal and regulatory compliance--have become more complex, as have the audit committee's core responsibilities.

Keeping the committee's agenda focused--and its eye on the ball--in 2016 will require an agenda that's manageable and realistic given the audit committee's time and expertise; a sharp focus on what's most important (starting with financial reporting and audit quality); allocating time for robust discussion while taking care of "must do" compliance activities; maximizing the value of internal audit (as the committee's "eyes and ears"); and ensuring the committee has the right composition and leadership.

Leading audit committees are recognizing that efficiency and effectiveness inside the boardroom increasingly hinges on spending time outside of the boardroom--visiting company facilities, interacting with employees and customers, and hearing outside perspectives--to understand the tone, culture, and rhythm of the organization.

Quality financial reporting starts with the CFO and finance organization; maintaining a sharp focus on leadership, succession planning, and bench strength is critical.

In our global survey, 42% of respondents said their audit committee is "not effective" in CFO...

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