In a rapidly changing business environment characterized by evolving social needs and emerging technologies, the role of audit committees is undergoing significant transformation.
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These changes are driven by various factors, such as online shopping, fintech innovations, remote work, augmented reality, robotic process automation, and artificial intelligence. The role of audit committees is expanding to address new challenges.
Expanding audit committee responsibilities
The traditional roles and responsibilities of audit committees, including overseeing financial reporting processes, audits, and regulatory compliance, are evolving to address a broader range of risks. Recent events, such as the Silicon Valley Bank collapse and high-profile fraud investigations, highlight the need for more robust audit committee roles that proactively address risks before they become major issues.
Enterprise risk management (ERM)
ERM has become a vital component of an organization's risk mitigation strategy. Audit committees are taking on the responsibility of overseeing ERM to ensure that it aligns with the organization's strategic goals and regulatory requirements. Effective ERM practices require a comprehensive understanding of all business processes and their interactions with internal and external environments.
The Sarbanes-Oxley Act (SOX) mandates internal controls over financial reporting. Audit committees play a crucial role in overseeing SOX compliance, and the ever-evolving business ecosystem poses challenges in maintaining comprehensive and adaptive SOX programs.
Environmental, social and governance (ESG)
ESG matters are gaining prominence, with the SEC proposing rules for climate-related disclosures. Companies are increasingly discussing ESG topics in audit committee meetings. The audit committee's role extends to ensuring alignment with ESG disclosure requirements, regardless of whether they directly oversee ESG governance.
Cyberattacks are a growing threat to organizations, and audit committees are responsible for overseeing the use of integrated methodologies in cyber risk disclosure and reporting. Effective cybersecurity governance integrates IT expertise, risk management, and strategic vision.
Upskilling the workforce
The dynamic nature of risks and compliance needs necessitates a skilled workforce. Audit committees should ensure the organization's workforce is adequately staffed with the right talents while maintaining a balance between granular details and the overall picture.
Read to the full report, The audit committees evolving role, to learn how audit committees can adapt to the changing business landscape, prepare for disruptions, and ensure the organization's resiliency. Mazars offers various consulting services to help organizations address these challenges and stay ahead of the curve.