Audit Committee Leadership Summit, August 2017
On June 29, 2017, members of the North American and European Audit Committee Leadership Networks (ACLN and EACLN) met in Washington, DC, for their 12th annual summit. In a members-only session, they discussed audit committee effectiveness, providing insight into how committees can improve performance in the face of mounting stakeholder demands.
In conversations before, during, and after the meeting, members touched on the following topics:
Thorough preparation enables committees to focus on the critical issues. Financial reporting oversight remains the key task of the audit committee, but the committee must also tackle an ever-increasing number of critical, sometimes unexpected, issues. Effective agenda setting allows the committee to cover the basics and meet the mandate of their charters, while also attending to emergent topics. Audit chairs have to work closely with management to focus the agenda, ensure committee materials are fit for purpose, and set the committee up for success.
Executive sessions can help keep committee meetings on track. Executive sessions provide the audit committee with the opportunity to speak candidly on issues without management or the external auditor present. Audit chairs use these sessions before the meeting to address members’ unanswered questions and to bring the group into agreement on the topics of the upcoming discussion. The committee can also hold executive sessions at which members of management or external advisers are present; these meetings can help allay committee members’ concerns and help the committee focus on critical issues.
Engaging other committee members helps to balance the workload. The audit chair usually shoulders much of the committee’s work, especially outside of committee meetings. There are, however, effective strategies for increasing the level of engagement of other committee members and distributing some of the committee’s responsibilities among members. Getting the full committee more involved can help a committee take full advantage of its collective expertise, and also help prepare a future audit committee chair for succession.
Regular reporting keeps the board informed on the audit committee’s work. Audit chairs often find it difficult to engage non-committee members in an audit committee’s activities. Frequent communication through regular reporting helps a committee foster broader board understanding.