Adding value: perspectives on the audit committee’s dynamic role
With offices reopening and some boards resuming in-person meetings, audit committees are evaluating which board practices to resume and which approaches developed during the pandemic to maintain. Tapestry Networks recently convened six virtual meetings with the audit committee chairs of approximately 100 large US public companies to exchange views on how audit committees can maximize the value they deliver to their companies and boards. Tapestry Networks summarized the key points arising from these discussions in its recently released report Adding value: Perspectives on the audit committee’s dynamic role.
Some notable themes from these discussions include:
Adapting board and audit committee processes: most audit committee chairs found the virtual meetings to be efficient and generally effective — with some noting ability to engage directly with a broader segment of company management. However, technology is not a replacement for in-person meetings, with many audit chairs noting elements of culture and trust being difficult to replicate in a virtual world. Most audit committee chairs expect that in the future, committees will most likely utilize a combination of virtual and in-person meetings.
Reshaping audit committee agendas: many audit committee members noted ESG disclosure and performance as a newly emerging area of audit committee responsibility (in particular, the quality of ESG reporting and the design and testing of related controls used to verify its accuracy). Other topics raised as audit committee agenda priorities include revisiting their approach to risk oversight (including scheduling stand-alone deep dives on specific, high-risk topics), increasing its focus on cybersecurity and data privacy, attracting and retaining finance function talent, and re-assessing internal audit skill sets and talent.
Enhancing committee composition: as the scope and mandate of the audit committees continue to evolve and grow, boards and audit committees are examining how best to strengthen its audit committee members so that it is adding as much value as possible. In addition to examining the mix of skills, backgrounds, diversity, and expertise, boards are rethinking board training and development initiatives and considering new approaches to tackle audit committee responsibilities.
As audit committees look to enhance their overall effectiveness, we encourage audit committees to consider these points and discuss ways to enhance their effectiveness.