According to the 2017 Global Audit Committee Pulse Survey, our latest report from KPMG’s Audit Committee Institute (ACI), more than 40 percent of audit committee members surveyed say their risk management programmes/ processes require ‘substantial work’, and a similar percentage say that it is increasingly difficult to oversee major risks.

KPMG surveyed more than 800 audit committee members and chairs in 42 countries, providing insights that audit committees around the world can use to sharpen their focus, benchmark responsibilities and practices, and strengthen oversight.

Overall, audit committees are largely satisfied that their agendas are properly focused on legal and regulatory compliance issues, maintaining internal controls over financial reporting, and key assumptions underlying critical accounting estimates. However, they see room for improvement when it comes to focusing on CFO succession planning, talent and skills in the finance organisation, tone at the top and culture, and aligning the company’s short- and long-term priorities. While audit committees in general express confidence in financial reporting and audit quality, they rank legal/regulatory compliance, cybersecurity risk, company controls around risk, and tone at the top and organisational culture as among their top challenges. Nearly 4 in 10 said the committee’s effectiveness would be most improved by having a ‘better understanding of the business and key risks’, while nearly a third said additional expertise related to technology or cybersecurity would be helpful.

The report highlights six key takeaways:

• Risk management is a top concern for audit committees.
• Internal audit can maximise its value to the organisation by focusing on key areas of risk and the adequacy of the company’s risk management processes generally.
• Tone at the top, culture and pressure for short-term results are key challenges – and may need more attention.
• CFO succession planning and bench strength in the finance organisation continue to be weak spots.
• Two key financial reporting issues may need a more prominent place on audit committee agendas: implementation of new accounting standards and non-GAAP financial measures.
• Audit committee effectiveness hinges on understanding the business.