Whatever your ambitions are, an independent and consistent view of the company’s health is always going to be important.
Audit committees can provide confidence to internal management and external stakeholders by offering consistent support to the board through independent assessment of the company’s financial governance and risk management.
Growth is essential for all companies, yet it must be controlled and sustainable. An audit committee can give internal management and external investors enhanced confidence in the financial stability of the business through effective internal controls and high-level oversight of potential risks.
Whatever the company’s ambitions are — whether an Initial Public Offering (IPO) or other forms of outside investment — an independent and consistent view of the company’s health is always going to be important. Preparing for additional scrutiny by adopting listed-company practices in advance has a value that cannot be overstated. Even if an IPO is not on the horizon as an exit strategy, the uninterrupted improvement and growth of a private company will continue to be important in the increasingly stiff competition for market share.
This article is not a definitive statement that all private companies should have an audit committee. It is simply an addition to the discussion about good corporate governance. We live in a world that demands accountability — a time where movements like ethical capitalism, corporate bonus examination and populism are gaining traction. Although these three ideologies are in no way related, they all demand heightened proof of information and “sense-checking.”
Adding an audit committee to a private business can be a way of demonstrating transparency, ethical financial behavior and good business management. Creative start-ups won’t stay small forever, and when they grow to a point that attracts scrutiny by the public and media, it would be practical to be able to demonstrate that an independent, internal financial process has been followed for years.
Finance teams today have access to more data than ever before. In order to harness the power of that data to create value-driven reporting, they should utilize the power of the latest technological advances and build trust in their data analytics. This digital transformation of reporting also necessitates finance leaders to think differently about the talent profiles and skill sets of the people they recruit for their teams.