This report, published by KPMG, notes how today, organizations realize that the difficult economic recovery lies ahead. Therefore, boards and audit committees are focusing their strategies to achieve growth. Simultaneously, audit committees are focusing on the risks related to these new strategies. Audit committees are helping to ensure that appropriate audit plans and controls are in place to detect and manage the associated risks. At KPMG’s Spring 2010 Audit Committee Roundtables, five key issues were highlighted for boards and audit committees to consider as they help guide their organizations through new growth strategies:
1) As organizations focus on growth strategies, boards and audit committees need to “self reflect” on the organization. Here are the types of questions to address during the “self reflection”:
- What kind of organization are we now, or are we trying to be?
- Is our growth strategy realistic?
- What are the critical factors for our success?
- Can our current management execute our growth plan?
2) Audit committees need to help ensure that the internal audit system focuses on the risk and controls related to the growth strategies. The kinds of questions to ask are:
- Are controls aligned with key strategic and operational risks?
- Is the audit committee obtaining assurance from internal audit on the management of strategic and operational risks?
- Do operational audits actually inform the organization on how the business is performing?
3) Board and audit committees need to focus intensely on financial communication and disclosures. In addition to closely reviewing annual and quarterly reports, audit committees need to carefully examine the following:
- MD&A and other disclosures
- Earnings press releases
- Analyst calls
4) Boards and Audit committees need to evaluate the tax risks of their new strategies, and ensure that there are processes in place to oversee these risks. Some current tax risks include:
- Likelihood of corporate tax increases
- Possibility of increased coordination by tax authorities
5) Examine how the organization’s financial reporting system held up under the stresses of the past two years. Boards and audit committees need to address questions such as:
- Are there any areas that need to be strengthened?
- Did the internal control function do what it was supposed to do?
Addressing these five key issues will help boards and audit committees achieve successful growth strategies in the uncertain future.
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