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.
