Kristy Carscallen is Canadian managing partner, audit, with KPMG in Canada
Investors have undoubtedly noticed all the talk about business disruption, as public companies describe the technology and market forces that are unleashing agile new competitors, enabling innovation and triggering organizational transformation.
Just as shareholders are trying to decipher the impact, so, too, are corporate audit committees. Already grappling with mounting business and regulatory complexity, corporate boards are always trying to enhance their professional knowledge and oversight capabilities.
Although the audit profession tends to be stable and predictable, there have been milestone moments heralding important benefits for the investing public. Just as the U.S. Sarbanes-Oxley Act upped the stakes, driving improved oversight of financial reporting, internal controls and risk-management practices, business disruption is the new challenge.
Suddenly, topics such as artificial intelligence, cyberattacks and climate change are appearing on audit committee agendas, and board members are being asked to deliver broader and deeper specialization.
To paint a picture of the emerging pressures, a recently released report by KPMG in Canada, Audit Trends 2016, outlines the top trends affecting the governance and oversight responsibilities of audit committee members. Here are the highlights.
Technology risk
Audit committees must acquire the knowledge to assess the impact of technology disruption on their organizations, from possible business-model destabilization to risks associated with IT transformation projects. They must also learn to evaluate potential liability caused by a company's growing tech footprint, including data protection.
Political and economic risk
Committees must stay apprised of political and economic affairs across our globalized economy, whether or not their company has foreign operations. They must appreciate potential risks posed by events, such as political change in Brazil, shifting commodity demand in China or migration patterns in Central Europe.
Evolving corporate reporting
Rising shareholder and regulatory expectations mean public companies must offer more timely, complete and transparent reporting. They must also pursue new forms of corporate disclosure, including integrated and strategic reporting, customized audit reports and more relevant key indicators that accurately portray performance.
Emerging regulatory standards
Already immersed in the task of ensuring compliance with domestic and global regulations, audit committees must be alert to developing regulatory change in other jurisdictions that could shape the Canadian landscape. Boards must be mindful of complex new standards being debated overseas relating to everything from consumer privacy measures to accounting standards for hedging instruments and revenue recognition.
While this maze may have corporate boards feeling the pressure, there is good news: Today's disruptive forces are also empowering audit committees to face the challenge. For example, sophisticated new technologies, data and analytics techniques are giving audit departments greater access to information, helping them scrutinize end-to-end data processes and allowing them to compile more comprehensive analysis.
But to leverage the power of these enriched capabilities, audit committees must also transform themselves. They must expand their skill sets with fresh talent or education. They may need to engage third-party advisers on complex issues and collaborate more to review internal controls. They should also embrace longer-term monitoring and increase the frequency of their risk framework reviews, stress testing and scenario planning.
All this can help audit committees continue to deliver "mission-critical" financial and governance oversight. They can enhance overall audit quality, spot new risks, empower better decision-making and bring assurance to shareholders watching the dizzying pace of disruptive change.