King III, an international focus on anti-corruption and cross-border cooperation have led to legal and regulatory issues cropping up that require key areas of compliance to be implemented.
Anton van Wyk, risk advisory services leader at PwC, says stakeholders now have greater expectations from audit committees, requiring audit committee members to take on a role that includes risk management knowledge and new skills far beyond what they have practiced.
“This step up by audit committees is dramatic – not only are audit committees focused on the financial aspects of a business, but also non-financial issues,” says van Wyk.
According to the publication Audit Committee Effectiveness, the good news is that boards of directors generally have confidence in their audit committee’s ability to monitor accurate financial reporting. In the PwC 2010 Annual Corporate Directors Survey, 97% of directors rate their audit committee as “very effective” or effective”.
However, audit committees are expected to understand broader topics aligned to their companies and strategies. If their company is looking to expand its geographic footprint, or is listed on an international exchange to fully understand additional risks, such as regulations flowing from the Bribery Act in the UK, audit committees have additional homework to do.
Not only are the complexities and ongoing changes to accounting standards considered, there has to be insight into global trends too. Risk such as resource depletion, political challenges across countries, climate change, radical transparency and greater expectations by stakeholders are matters that have to be considered and are factors making up the new world order.
According to van Wyk, some key global risks that could impact businesses locally are the slide in the US dollar and concerns of a double-dip recession. Food security has also risen on the agenda, having its own impact on global economies, while increased focus to be a good corporate citizen requires committee members to highlight outcomes of events such as the Kyoto protocol and Cop 17, the latter of which will take place in Durban this December.
The fourth edition of Audit Committee Effectiveness: What Works Best, authored by PwC is available to download for $65.