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What do audit committees think about risk and audit?

A recent KPMG report shows that they appear to be asking the right questions to find out what audit committees think about risk and audit.

audit committeesI am encouraged by the latest KPMG report, their 2017 Global Audit Committee Pulse Survey.

I am encouraged because KPMG appears to be asking the right questions and getting intelligent answers.

Here are some interesting excerpts, with emphasis added:

  • …nearly 4 in 10 said the [audit] committee’s effectiveness would be most improved by having a “better understanding of the business and key risks”
  • The effectiveness of risk management programs generally, as well as legal/regulatory compliance, cyber security risk, and the company’s controls around risks, topped the list of issues that survey participants view as posing the greatest challenges to their companies. It’s hardly surprising that risk is top of mind for audit committees—and very likely, the full board—given the volatility, uncertainty, and rapid pace of change in the business and risk environment. More than 40 percent of audit committee members think their risk management program and processes “require substantial work,” and a similar percentage say that it is increasingly difficult to oversee those major risks.
  • Internal audit can maximize its value to the organization by focusing on key areas of risk and the adequacy of the company’s risk management processes generally. The survey results show that audit committees are looking to internal audit to focus on the critical risks to the business, including key operational risks (e.g., cyber security and technology risks) and related controls—and not just compliance and financial reporting risks. They also want the audit plan to be flexible and adjust to changing business and risk conditions.
  • Tone at the top, culture, and short-termism are major challenges—and may need more attention. A significant number of audit committee members—roughly one in four—ranked tone at the top and culture as a top challenge, and nearly one in five cited short-term pressures and aligning the company’s short- and long-term priorities as a top challenge. Meanwhile, nearly the same percentage of audit committee members said they are not satisfied that their committee agenda is properly focused on those issues.

Whether you are on a board, an executive, a risk or internal audit practitioner, each of these areas merits attention.

Does this survey reflect the situation at your organization? If so, what is being done about it?

I welcome your views.

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Norman D. Marks, CPA, CRMA

Norman D. Marks is an Author, Evangelist and Mentor for Better Run Business, as well as an OCEG Fellow and Honorary Fellow of the Institute of Risk Management. Mr. Marks has been a practitioner and thought leader in internal audit, risk management, and governance for a long time. He has led large and small internal audit departments, been a Chief Risk Officer and Chief Compliance Officer, and managed IT Security and governance functions. Read more
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