May 24, 2024

Audit Committees: Considerations for the 2024 Agenda

This HLS blog is authored by a UK-based KPMG team, but most of the nine matters it recommends for 2024 audit committee agendas are just as applicable for US-based companies. In addition to the continuing need to focus on financial reporting, internal controls and risk oversight, particularly given the current geopolitical, macroeconomic, and risk landscape, which can significantly impact forecasting and forward-looking disclosures and put stress on internal controls, the blog also highlights the following areas that need particular attention from audit committees this year:

– Committee bandwidth and skillsets as the audit committee’s areas of oversight further expand beyond its core responsibilities, particularly for new climate and sustainability reporting requirements

– Cybersecurity and data privacy as AI, geopolitical conflicts and ill-defined lines of responsibility cause cyber risk to intensify

– New climate & sustainability disclosures, with a particular focus on the quality and reliability of underlying data

– Audit quality by setting expectations with the external auditor regarding communications with the audit committee, including beyond what’s required, and by considering the results of inspections and efforts to address deficiencies

– Ensuring internal audit is focused on critical operational and technology risks and related controls — beyond just financial reporting and compliance risks

– Managing leadership and talent in the accounting and finance teams, given talent shortages, and overseeing digital strategies and transformations

– Closely monitoring the tone at the top to maintain a culture of ethics and compliance

– Oversight of generative AI, which may be focused on compliance and internal controls or may be broader depending on the audit committee’s mandate

The blog’s discussion of the audit committee’s role in audit quality is UK-focused, but audit quality is an issue that’s been getting a lot of attention from regulators here in the US as well. The suspension of BF Borgers showed one of the worst-case scenarios in terms of auditor issues creating complications for public company clients. At a minimum, audit committees should be heeding the advice in the February 2024 statement from the SEC’s Office of Chief Accountant, which suggested committees evaluate whether and how they consider things like results of PCAOB inspections, industry expertise of the engagement team, sufficient involvement and leadership by the audit partner, the appropriateness of time spent and staffing and any changes in hours or staffing from previous audits.

Meredith Ervine