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What Canadian audit committees should prioritize in 2023

Photographic portrait of Zahid Fazal
Zahid Fazal

EY Canada Managing Partner, Assurance

4 minute read 25 Jan. 2023
Related topics
Audit
Assurance

We review key considerations for audit committees during the 2022 year-end audit cycle and beyond.

In brief

  • Audit committees play an important role in building resiliency and confirming how companies are preparing to respond to and manage risks in the year ahead.
  • Potential regulatory developments in 2023 could impact reporting requirements, disclosures, and policies and procedures.
  • Geopolitical uncertainty presents challenges that require careful monitoring of shifts in foreign and domestic policies and recalibrations of strategies.

This report will assist audit committees to proactively address developments in risk management, financial reporting, tax and the regulatory landscape.

1. Risk management

Rampant inflation fears, geopolitical tensions and the shadow of the COVID-19 pandemic are the critical threats occupying the minds of CEOs, boards and audit committees. A recent EY CEO survey indicates that, despite the multiple headwinds, many CEOs remain focused on building long-term optionality, resilience and value. Leading companies are holding firm on transformational investment plans — or formulating new strategies to navigate the new complexity. This includes reframing the company’s strategy; reimagining its portfolio, global operations and footprint; and reinventing its ecosystems.

Against this backdrop, boards and audit committees are revisiting risk management practices to make sure that risks are managed effectively across the organization, and building more resiliency and overall preparedness to respond and manage these headwinds going into 2023.

For the full report and complete list of questions for audit committees, download the PDF.

Download the report
Key risk areas of focus for 2023 include:
  • Unconstrained inflation, ongoing pandemic effects, and geopolitical uncertainty
  • Cybersecurity
  • Talent strategies and workforce issues
  • Evolving risk management programs to incorporate technology-enabled risk management
  • Transforming internal audit
  • Enhancing integrity and sharpening the focus on fraud and overall compliance
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2. Financial reporting

Companies are continuing to re-evaluate their disclosures as stakeholders seek to understand the impact of various external developments on the business. This includes the continued global economic uncertainty; climate and other ESG factors; and evolving geopolitical developments. We highlight some of these and other key financial reporting developments and trends to assist audit committees in driving audit quality and encouraging a culture that supports the integrity of the financial reporting process.

Organizations continue to be affected by macroeconomic factors, such as inflation, rising interest rates, supply chain disruptions and stock market volatility, as well as the war in Ukraine and its ripple effects. We anticipate that audit committees will continue to evaluate these evolving impacts and changes in the business environment on their financial reporting processes.

Companies should continue to update their disclosures and consider the financial statement effects of the current market conditions (e.g., inflation, pandemic) and their expectations for the future. It will be important for audit committees not only to understand management’s view of future economic conditions, but also validate that the organization provides transparent disclosures regarding these views. 

3. Tax and other policy-related developments

With new and anticipated guidance from Canadian and non-Canadian governments, boards and audit committees must oversee their organizations’ responses to tax changes in real time. They need to closely monitor the tax environment to recognize both potential challenges and opportunities and to remain agile in the face of uncertainty.

Audit committees and boards should be monitoring these Canadian changes and other Global changes and ensure that management is considering and appropriately accounting for the anticipated impacts.

4. Regulatory developments

Companies should continue to focus on their disclosures and investor protection. Given the changing regulatory landscape and increasing investor expectations of climate-related disclosures and the evolving regulatory requirements, companies will need to ensure all environmental, social and governance (ESG) disclosures, whether voluntary or required, are factual, balanced, and consistent.

Audit committees should consider how their companies should be preparing for potential regulatory changes, which could impact reporting requirements, disclosures, and policies and procedures.

Summary

Ongoing inflation and geopolitical tensions are just two of the many areas of focus for audit committees in 2023. They are also keeping a close eye on emerging risks, talent matters and ESG reporting as well as evaluating changing disclosure requirements. Audit committees should be ready to ask important questions about these and other issues such as tax and policy-related developments during year-end discussions with the board, management, auditors, and other key stakeholders.

About this article

Photographic portrait of Zahid Fazal
Zahid Fazal
EY Canada Managing Partner, Assurance
Surfacing business insight that drives progress and possibility.
Related topics
Audit
Assurance

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