European Audit Committee Leadership Network, March 2021
Managing the responsibilities of the audit committee is an evolving challenge for today’s audit chairs. Effective committee leadership is more important than ever, especially as proponents of governance reform continue to push for increased audit committee responsibilities.
Corporate scandals have accentuated the importance of strong audit committee leadership. As one member noted, “In all the recent failings, you can usually link these weaknesses to leadership competencies and traits.” Audit chairs are thus faced with both a growing scope of work and heightened responsibility to ensure their committees discharge their duties well.
On 5 February 2021, members of the European Audit Committee Network (EACLN) met virtually for a members-only discussion of audit committee leadership.
Preparing for and leading a committee meeting
Audit chairs dedicate a significant amount of time before meetings to prepare, often by discussing the agenda, premeeting materials, and presentations with management, other directors, and the external auditor. Many members use these conversations to keep meeting materials concise and to highlight priority issues for committee discussion.
Maintaining a high-performing audit committee
Audit chairs discussed the challenges of building an effective audit committee, delegating responsibility to members based on expertise, and engaging the entire committee, especially when some directors are less vocal. Audit chairs also talked in depth about the growing importance of education sessions, not only for new members, but for the entire committee as the corporate governance landscape continues to rapidly evolve.
Defining the role and scope of the audit committee
As the oversight responsibilities of audit committees continue to grow, sharing some of those responsibilities with other committees and coordinating who is overseeing what becomes an increasingly complex challenge. Members discussed their practices around assigning oversight responsibilities and collaborating with other committees.