KPMG highlights new risks facing audit committees
'Business disruption,' one of today's most discussed topics in corporate circles, is now dramatically influencing the practice of audit, with serious impacts on the governance and oversight duties of audit committees. That is a key conclusion of Audit Trends 2016: Targeting transformation, a newly released report by KPMG in Canada, that chronicles the rise of new risks, from technology and political volatility to intensified corporate and regulatory reporting highlighting the urgency for audit committees to prepare.
"Disruption is often associated with the way technology, business and market forces create external threats or opportunities for companies, driving them to rethink how to serve customers or fend off new competitors," notes Kristy Carscallen, Canadian Managing Partner, Audit, KPMG. "However KPMG's report shows how disruptive trends are also impacting the 'mission critical' internal audit function, which is ultimately responsible for evaluating business performance and spotting potential risks on the horizon."
Four trends putting pressure on corporate audit:
The KPMG report highlights four major disruptive trends in business that are multiplying the pressure upon audit committees to elevate the breadth, depth and speed of their oversight activities.
"While these trends have an impact on organizations in most industries, they pose an even greater challenge for companies in survival-focused industries, such as oil and gas as well as mining firms, that are already grappling with large-scale disruption on their economic and fiscal models," observes John Gordon, Canadian Managing Partner, Quality and Risk Management, KPMG. "These companies are often narrowly focused on immediate issues such as bank debt, capital management and cost reduction initiatives and should expand their stress testing programs and risk scenarios to consider additional disruptive risks that could sneak up on their organization."
Audit committees can transform themselves to manage the disruption:
The KPMG report notes that, despite the vast scope of challenges that are transforming the mandate of audit committees, they can apply a number of best practices to help ensure they are considering the full range of existing and emerging issues and that they have the right level of technical knowledge and experience to navigate the disruptive forces. For example, organizations can increase the depth and frequency of their risk framework reviews and testing, and strengthen their internal talent and third-party expertise to gain the skills and experience to manage the unfolding issues.
"Our report concludes that audit committees are constantly having to face the wave of disruption now buffeting the audit function, bolster their oversight capabilities and ultimately improve the quality of the audit to deliver greater value to their organizations. Of course, managing inevitable change is not only a priority for audit committees and boards, but for management, auditors, regulators, shareholders and even the public at large," said Kristy Carscallen.
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