What is top of mind for senior executives and directors this year? Regulatory changes and heightened regulatory scrutiny, succession challenges, economic conditions and cyber threats – this according to the latest Protiviti and North Carolina State University ERM Initiative’s survey, Executive Perspectives on Top Risks in 2015.
You can get a preview of the insights from the survey and more in the latest issue of The Bulletin, our electronic newsletter on corporate governance and risk management. The issue is chockfull of collective wisdom culled from the interactions of Protiviti’s professionals with client audit committees, roundtables we’ve conducted, and discussions with directors at conferences and other forums.
As part of an ongoing effort to help you find the signal amid the noise of a busy and information-rich world, we’ve distilled this information into 10 actionable steps we call The 2015 Mandate for Audit Committees. The first five items relate to enterprise, process and technology issues. The remaining items pertain to financial reporting.
Here, then, are our recommendations for setting the 2015 audit committee agenda:
Enterprise, Process and Technology Issues
- Update the company’s risk profile to reflect changing conditions – Consider emerging risks and changes in existing risks and address the adequacy of risk management capabilities.
- Oversee the capabilities of the finance organization and internal audit to ensure they can deliver to expectations – Capabilities should be continuously aligned with the company’s changing needs and expectations.
- Pay attention to risk culture to address the risk of dysfunctional behavior undermining risk management and internal control – The tone at the top and in the middle affects risk management and internal control performance.
- Understand how new technological developments and trends impact the company – Be mindful of the implications of technological innovations to security and privacy, financial reporting processes, and the viability of the company’s business model.
- Assess committee efficacy – The committee’s composition, expertise and engagement should keep pace with the company’s changing business environment and risk profile.
Financial Reporting Issues
- Pay attention to revenue recognition – The Financial Accounting Standards Board’s (FASB’s) new standard may affect financial reporting systems.
- Determine the Public Company Accounting Oversight Board (PCAOB) impact on the audit approach – PCAOB inspections, standards and guidance have raised concerns regarding the adequacy of public company auditing processes and have led to changes.
- Understand the impact of COSO’s updated Internal Control – Integrated Framework – The new framework has the potential to affect internal control reporting, internal audit activities and other areas.
- Understand and evaluate management’s significant accounting estimates – Ensure an adequate focus on the financial reporting processes requiring the most judgment.
- Stay current on audit reforms – An expanded report, auditor rotation and other measures are being considered in various countries.
I hope you find time to read the latest Bulletin in its entirety. These are interesting times. The new year is already off to an exciting start, and I can’t wait to see what challenges and triumphs await us all in the months ahead. I’m sure it will be interesting.