The New Audit Committee Stewardship Framework (Part II of II)
The updated central role of the Audit Committee goes beyond enhancing the audit quality and building confidence in the integrity of financial disclosures. The new stewardship role of the audit committee will be critical in creating the right environment for corporate performance including the board's responsibility to create a platform of the business culture of integrity, respect, accountability and transparency. Audit committees must develop an audit strategy, to address significant audit risks, appropriate independence and effectiveness of the external auditor
The corporate business environment is constantly changing. Disruption scenarios, digitisation, changing demographics, combined with the frequent fluctuations in the stock market, political turmoil, erratic oil prices, and the uncertainties related to US elections or the Brexit in 2016 continue to create instabilities in our hyper-capitalist society. Each of the above global disturbances reflects on the value of the stakeholder wealth, the value of corporate assets, and distorts the true fiscal picture of the company, due to external concerns.
Therefore the Board of Directors or the Audit Committee's cannot address the above issues by looking backwards to the financial statements as these changes in nonfinancial external conditions, are never recorded on the corporate balance sheet, but still, affects the business value for better or for worse.
Therefore the Audit Committee framework must reflect the new range of important responsibilities, and the key areas of recurring concerns, the emerging risks to comply with the new audit committee's oversight activities and addressing the key stakeholders concerns to strengthen the internal and external audit quality.
Therefore the new audit committee stewardship framework has little to do with financial accounting issues but focuses on complex, subjective interpretations that cause vulnerability to a series of controversial global doctrines.
Therefore the new audit committee stewardship framework must address the primary concerns of all stakeholders including corporate managers, investors, oversight authorities and regulators and promote the components of industry-specific nonfinancial issues, to aid and abet and avoid the failure to deter, detect, and correct the conditions that could lead to a black-swan breakdown.
Third-party benefits of a proper audit.
Resolving delicate audit issues correctly takes time requires a change procedure to address the uncertainties and distraction of corporate governance or GRC processes. Audit committees must assure that management is taking the necessary steps to be on top of the responsibility transition process;
- What are the key GRC profiles, that reflect the current business reality to
- highlight the emerging enterprise risks
- management’s capability to address these risks
- need for guidance or education to address the overall responsibility of the transition
- Understand the technology risks of digitisation, cyber security, data privacy, business continuity
- Monitor the tone at the top, middle and bottom to the risk culture and the control environment
- Safeguard brand reputation, issues that restrict growth opportunities, retain top talent, succession planning, and an operation model that promotes performance monitoring.
- Monitor and address the volatility in the global financial markets that affect the operations and strategy.
Reviews from the recommendations from the two audit committee conferences; http://www.copenhagencompliance.com/2016/auditcommitteeanno/dk/index.htm
At our Audit Committee events, we will supply participants with a number of assessment tools including the Copenhagen Compliance Stewardship Framework.
If you decide to develop a customised framework, to reflect the significant and emerging audit risks of the future, based on the inspiration and experiences of other corporations, many scenarios can be found in the PCOAB 2015 inspections and the recurring audit concerns identified in past reviews.