Audit committees around the world said economic and political uncertainty and volatility, regulatory compliance, and operational risk continue to pose the greatest challenges for companies in the year ahead , according to KPMG’s 2015 Global Audit Committee Survey covering 1,500 audit committee members in 36 countries. For the second straight year, respondents also said it is increasingly difficult, given the audit committee’s time and expertise, to oversee major risks in addition to financial reporting.
Three out of four respondents surveyed said the time required to carry out their audit committee responsibilities has increased significantly (24 percent) or moderately (51 percent), and half said the job continues to grow more difficult given the committee’s time and expertise. Many audit committee members say they have at least some responsibility for significant aspects of risk oversight.
“The resounding message is that the audit committee can’t do it all,” said Tim Copnell, Chairman of KPMG’s UK Audit Committee Institute. “Overseeing financial reporting and audit is a major undertaking in itself, and the risk environment is clearly straining many audit committee agendas.”
Asked which specific issues will require more attention in 2015, survey respondents cited cyber security and the pace of technology change, risk management and controls over operational risk, and regulatory compliance.
“A positive development is that more boards are reassessing or reallocating risk oversight responsibilities to better balance the workload,” said Copnell. More than one-third of boards have recently reallocated risk oversight duties among the full board and its committees (up from 25 percent last year), and 32 percent said they may consider doing so in the near future. “A lighter risk management agenda for the audit committee can translate into more time for quality discussions and a deeper understanding of the business,” he added.
While audit committees continue to express confidence in their oversight of the company’s financial reporting and audit, the KPMG survey highlights a number of ongoing challenges and concerns globally. These include:
- The quality of risk information is falling short, particularly on cyber security and technology risk (which supports the findings of a survey carried out by KPMG as part of the UK Government’s Cyber Governance Health Check), talent and innovation, and business model disruption.
- The company’s readiness to respond to loss of critical infrastructure (financial systems, telecommunications networks, transportation, energy/power) may require more attention.
- Among senior leaders of the business, the CIO ranks lowest in terms of quality interaction and communication with the audit committee.
KPMG’s 2015 Global Audit Committee Survey is available here (PDF).