Audit Committee Realities: Insights from leading European boards

Shareholders, regulators, and other stakeholders of Europe’s publicly listed companies are increasingly focused on the role and performance of audit committees. The European Union’s 2014 Audit Regulation and Directive (ARD) has several provisions affecting audit committees. Recent financial scandals have further heightened public attention to audit committees and audit quality. Nonetheless, because most of an audit committee’s work is done in a confidential setting, many stakeholders are poorly informed about what audit committees do. 

To help a diverse audience better understand audit committees, Tapestry Networks conducted an independent research project that captured an inside look at the practices of the audit chairs and audit committees of many of Europe’s largest listed companies. Drawing on one-on-one interviews, group discussions, and a quantitative survey, the project shared the insights of 55 audit chairs in a report entitled Audit Committee Realities: Insights from Leading European Boards. Most of the audit chairs consulted for the report are current or former members of Tapestry Networks’ European Audit Committee Leadership Network (EACLN), which has convened three or four times a year since 2004 to discuss good practices and engage in dialogues with regulators, investors, and other stakeholders in corporate governance and audit quality. EY provided financial support to Tapestry Networks for this project.

Audit Committee Realities is not intended to represent what the “typical” European audit committee does or to serve as a collection of best practices. Nor does it advocate for change in audit policy or regulation. It does provide insights into audit committees’ core activities, including oversight of the external auditor and oversight of risk—two increasingly important areas in which audit committees typically take the lead for their boards. The report’s findings also raise questions about the future of audit committees and their role in corporate governance.

The advisory board

To provide an additional check on our findings, Tapestry Networks established an advisory board of leading audit committee chairs. The advisory board consists of EACLN members who agreed to assist with this research project by providing advice and insight on key issues and reviewing initial drafts. The board includes the following audit chairs: