2015-01-27-KPMG-ACI_s_Audit_Committee_Agenda_8页_1mb

KPMG's Audit Committee Priorities for 2014 Summary

Core Content

KPMG's Audit Committee Institute outlines the key priorities for audit committees and boards in 2014, shaped by global economic uncertainty, increased regulation, and the rapid transformation of the business environment through technology. The summary focuses on maintaining financial reporting quality, adapting to regulatory changes, leveraging internal audit, strengthening ethics and compliance, managing tax risks, and addressing broader governance matters.

Main Priorities

1. Stay Focused on Financial Accounting & Reporting

• Audit committees must remain vigilant in ensuring the accuracy and integrity of financial reporting.
• Monitor fair value estimates, impairments, and management's judgments on key assumptions.
• Understand the implications of new accounting standards from IASB and FASB, such as revenue recognition, leases, and financial instruments.
• Ensure the CFO and finance team have the necessary resources, skills, and a clear succession plan.

2. Monitor Key Regulatory Changes

• Global regulators are enhancing auditor independence, objectivity, and professional skepticism.
• Audit committees should be aware of initiatives like audit firm rotation requirements and restrictions on non-audit services.
• They should take a proactive role in ensuring audit quality by evaluating key indicators such as team expertise and internal quality reviews.
• Expand the audit committee report to provide more transparency to investors.

3. Leverage Internal Audit

• Internal audit should focus on critical business risks, including operational and technology risks.
• Ensure internal audit is aligned with the company’s overall risk management framework.
• Assess whether internal audit has the right resources, skills, and independence to add value.
• Encourage internal audit to act as a trusted adviser and consultant to the audit committee.

4. Ensure Ethics and Compliance Programs

• Companies face heightened fraud and corruption risks due to global expansion and complex supply chains.
• Compliance programs must cover all vendors and third parties in the supply chain.
• Communicate high ethical standards and social responsibility to all levels of the organization.
• Recognize the impact of social media on transparency and brand reputation.

5. Understand Tax Risks and Brand Implications

• Tax is no longer just an expense but a strategic and reputational issue.
• Audit committees should assess international tax risks and the implications of "tax morality" and "tax transparency" debates.
• Monitor tax reform discussions in various jurisdictions and analyze potential legislative changes.
• Establish a clear tax risk appetite and ensure regular communication from the chief tax officer.

Broader Governance Matters

1. Understand Technology's Impact

• The "Nexus of Forces" (social media, cloud, mobile, big data) is transforming the competitive landscape.
• Audit committees should evaluate whether the board is equipped to lead the company in this new environment.
• Ensure the board has insight into how these technologies affect strategy, business model, and competitive dynamics.

2. Recognize Strategic Risk Management

• Risk management should not be limited to defense but also support strategic offense.
• Audit committees should assess the company's risk philosophy, appetite, and how it aligns with strategy.
• Ensure robust risk discussions and awareness of potential biases.
• Evaluate the allocation of risk responsibilities and decision rights across management.

3. Set the Tone and Monitor Leadership

• Leadership's tone and culture are critical in shaping the organization's ethical and compliance environment.
• Audit committees should actively listen to perspectives from employees and external stakeholders.
• Monitor management's engagement with social media and public perception of the company.
• Ensure the board has visibility into the tone and culture of global operations.

Key Information

• Global Challenges: Economic uncertainty, regulatory changes, and technological transformation are shaping audit committee agendas.
• Audit Committee Role: Must maintain oversight of financial reporting, compliance, and risk management while adapting to new governance expectations.
• Internal Audit: Should evolve into a strategic and value-added function, focusing on key risks and supporting the audit committee's oversight.
• Ethics and Compliance: Must address new vulnerabilities in global operations and supply chains, while adapting to regulatory environments like the FCPA and UK Bribery Act.
• Tax Risk: Requires a strategic approach, with attention to both legal compliance and reputational impact.
• Board Engagement: Audit committees should support the board in strategic and governance matters, ensuring alignment with the company's long-term goals.

Conclusion

KPMG's Audit Committee Institute provides a framework for audit committees to navigate the complex and evolving landscape of 2014. By focusing on financial reporting, regulatory changes, internal audit, ethics, tax risk, and broader governance, audit committees can better fulfill their oversight responsibilities and support the company's long-term success.