Many busy audit committee members are feeling strained as they try to perform effective oversight of the risk process, according to a global survey by KPMG.
More than 1,500 audit committee members from 34 countries took part in the survey, which showed that about 75% of respondents believe the time required to carry out committee responsibilities has increased. While 52% say they are satisfied with the amount of time and expertise their committees have to oversee the major risks on the agenda in addition to core responsibilities, 40% say that balancing is increasingly difficult, and 8% said they don’t have the necessary time and expertise.
Audit committee members would like to devote more time to oversight of the risk process (62%), followed by adequacy of internal controls related to operational risks (61%), cybersecurity (55%), and legal and regulatory compliance (52%).
Global economic upheaval and concerns about regulation and regulatory compliance are the biggest challenges companies face in the year ahead, according to the survey.
“The resounding message is that the audit committee can’t do it all,” Dennis T. Whalen, executive director of KPMG’s Audit Committee Institute, said in a news release. “Overseeing financial reporting and audit is a major undertaking in itself, and the risk environment is clearly straining many audit committee agendas today.”
Over the years, the audit committee’s role in risk oversight has changed, according to the survey. Thirty-five percent said their committee had reallocated or rebalanced risk oversight responsibilities among the full board and board committees, and 21% created new committees to focus on specific categories of risks. While half of the respondents said they had made no major changes, a majority of that group said they may consider changes in the future.
In the survey, audit committee members said they would be more effective if they could have a better understanding of the company’s strategy and risks (43%); greater diversity of thinking, perspectives, and experiences (38%); and more time on agendas for general discussion (34%).
The committee members rate themselves highly or generally effective in oversight of financial reporting disclosures. They are relatively ineffective in the area of CFO succession planning—42% said they were ineffective, and just 10% said they were highly effective.
One reason for their perceived ineffectiveness: the quality of information they receive. Information about cybersecurity needs improvement according to 41% of respondents, followed by information about talent management and development (36%), the pace of technology change (35%), and growth and innovation (30%).
—Neil Amato ( firstname.lastname@example.org ) is a JofA senior editor.