On June 19, NACD and partners KPMG’s Audit Committee Institute (ACI) and Sidley Austin LLP co-hosted the most recent meeting of the Audit Committee Chair Advisory Council, bringing together audit committee chairs from major U.S. corporations, key regulators and standard setters from the Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB), and Financial Accounting Standards Board (FASB), and other audit experts for an open dialogue on the key issues and challenges impacting the audit committee agenda.
As detailed in the summary of proceedings, the forum provided timely insights into a number of issues that are top of mind for audit committees. Key insights from the dialogue include:
- As the PCAOB continues to focus on enhancing auditor independence, skepticism, and objectivity, audit committees are wrestling with how to make the best use of PCAOB inspection reports, with some questioning the timeliness and relevance of the reports and the use of the term “audit failure.”
- Audit committees continue to discuss the potential value of more robust reporting from the audit committee and external auditors to provide greater insight into their work. Most delegates agreed that the auditor’s statement is the right area of focus.
- Companies should be preparing for the impact of FASB’s “big four” convergence projects—revenue recognition, leases, financial instruments, and insurance contracts—with a particular focus on the lead time IT departments will need to implement systems changes.
- Under new leadership, the SEC is refocusing on corporate accounting fraud and the quality of financial disclosures, while moving ahead with its already heavy rule-making agenda resulting from Dodd-Frank mandates and the JOBS Act.
- The allocation of risk oversight duties among the audit committee, full board, and other board committees is receiving increased attention, as the risk environment becomes more complex and audit committees reassess their risk oversight responsibilities.
- In their oversight role, directors serve in a part-time capacity, while management is full time, resulting in executives having a much deeper knowledge of the operational aspects and risks of the company. To overcome this inherent imbalance, directors should apply a “healthy” level of skepticism to the information and assumptions management provides.
- The audit committee’s effectiveness hinges not only on having the right mix of skills and backgrounds, but also having a robust onboarding process and commitment to continuing director education.
For the full day’s discussion and proposed council action items, click here to read the summary of proceedings.