It is a tough time for audit committees.
The financial crisis and recession have raised acute challenges, ranging from relations with the auditor to going concern statements, accounting treatment and financial reporting.
In particular, the crisis has focused the attention of boards and audit committees on how the company assesses and manages risk. The pressures of serving on an audit committee have increased; so has the time commitment. Fellow directors, the media and shareholders are all looking to the audit committee for reassurance that any looming risks to the business will be spotted and avoided.
New regulations have been introduced. The Walker review of the governance of banks and other financial institutions called for the introduction of risk committees to complement audit committees.
Meanwhile, the Financial Reporting Council has toughened up its guidance on the board’s responsibility for overseeing risk management.
In this environment, boards must take extra care to ensure that their audit committee is properly constituted and has the right objectives.
This paper, based on Odgers Berndtson’s extensive experience in helping boards recruit the best finance teams and audit committee members, looks at how the role and remit of the audit committee is changing in the wake of the financial crisis.
In particular, it asks how boards should implement new regulations in relation to the oversight of risk.
It concludes that, in uncertain economic times, the contribution of a strong audit committee is more important than ever and lies at the heart of an effective board.
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