Emerging from two years of pandemic-driven crisis and disruption, we continue to see how important trust and transparency are—not only to the functioning of the capital markets, but also to customer relationships, brand reputation, and the health and well-being of employees. For shareholders—and, increasingly, from a broader stakeholder perspective—much of that trust and transparency is grounded in the quality of the company’s financial reporting and disclosures and the story they tell. To that end, the audit committee’s oversight role has perhaps never been more important or more challenging.
The crises of 2020–21 and disruptions they’ve triggered—from accelerating technology transformations to upending long-standing “norms” of the workplace, business models, and the economy—have added significant stress and strain to financial reporting processes and the risk and control environment. That pressure is likely to continue given the demands for more and better climate and environmental, social, and governance (ESG) reporting, increased cybersecurity risks and ransomware attacks, a fast-changing tax and regulatory landscape, and other factors impacting the global risk environment—including the direction of COVID-19.
Drawing on our research, insights, and interactions with audit committees and business leaders, we’ve highlighted eight issues to keep in mind as audit committees consider and carry out their 2022 agendas:
- Stay focused on financial reporting and related internal control risks—job number one.
- Monitor the SEC’s rulemaking activities on climate and other ESG disclosures and clarify the audit committee’s related oversight responsibilities.
- Stay apprised of global tax developments and risks and recognize that tax has become an important element of ESG.
- Help sharpen the company’s focus on ethics and compliance.
- Reinforce audit quality and set clear expectations for the external auditor.
- Understand how technology is impacting the finance organization’s talent, efficiency, and value-add.
- Help ensure that internal audit is focused on the company’s critical risks.
- Make the most of the audit committee’s time together.