China Boardroom Update - Ten To-Do's for Audit Committees in 2010

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! China Boardroom Update Ten To-Do’s for Audit Committees in 2010 Issue 1 - February 2010 ADVISORY In 2009, the economic crisis placed tremendous stress on companies, alarming even the most experienced financial experts. Boards and audit committees guided companies through the crisis - monitoring financial forecasts by focusing on liquidity and cash management and assessing the company’s risk profile. As 2010 begins and both global financial and economic conditions are expected to improve, these monitoring strategies still take top priority. For companies that have survived the turbulent times, boards and audit committees need to take the lead in addressing key issues in the lingering volatile business environment. When considering and carrying out their 2010 agendas, audit committees should: ☑ 1. Regain control of the audit infrastructure such as IT and sales ☑ 4. Continue to monitor fair committee agenda. force? How far have we extended value issues, impairments, and the organisation through The challenges of the economic crisis management’s assumptions outsourcing and off-shoring? As -- access to capital, cash flow, underlying critical accounting companies cut costs and reduce counterparty risks, impairments -- estimates. their workforce, the control have dominated audit committee These issues, together with agendas. As signs of recovery environment becomes even more going-concern challenges, will emerge, take the ...

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• Publié par: Thowyor
• Nombre de lectures: 35
• Langue: English

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!       China Boardroom Update     Ten To-Dos for Audit Committees in 2010       I   ssue 1 - February 2010 Y ADVISOR     In 2009, the economic crisis placed tremendous stress on companies, alarmin g even the most experienced financial experts. Bo ard   s and audit committees guided companies through the crisis - monitoring financial forecasts by focusing on liquidity and cash management and assessing the companys risk profile. As 2010 b    obalegins and both gl financial and economic conditions are expected to improve, these monitoring strategies still take top priority. For companies that have survived the turbulent times, boards    and audit committees need to take the lead in addressing key issues in the lingering volatile business environment. When considering and carrying out the ir 2010  agendas, audit committees should:  

☑1. Regain control of the audit infrastructure such as IT and sales committee agenda.  How far have we extended force? The challenges of the economic crisis  the organisation through -- access to capital, cash fl ow,  outsourcing and off-shori ng? As counterparty risks, impairme nts --  companies cut costs and reduce have dominated audit commi ttee  their workforce, the control agendas. As signs of recov ery  environment becom es even more emerge, take the opportunity to  critical. Now is not the time to cut develop more focused (yet flexible)  back on the internal audit s budget. ' agendas, with an eye on the  (Please refer to #6 below). company's key financial rep orting risks. To improve the effi ciency of ☑3. Focus closel all financial on audit committee meetings, insist on y communications.  , spend  Earni s releases and scripts for l a q e c u s t a i s l v  i i t t t i y ie m p s e r ,   e o a - n n m  d l e  o e e w t n i - g n v a g a  g lu e m e i a  t o  e r d  ri c a h ls ecklist analy n st g callsoftenposemore n iscussions  issues than the audited financials ning to  tain i ortant r p a r t e h s e e r n t t h at a i n o  n m s. e  r D e o ly n  ' li t s l t e e tcompliance b b e u c si a n u e s s e s   t i h n e fo y r c m o a n tion-- m w p hich activities crowd-out substanti ve  often does not come from the at doin  s stem, is not d m is o c re u  s Q si & o A n  s a . n In d  l s e h s o s r  t, P l o o w ok e  rPoint g f a i u n d a i n te ci d a , l   a re n p d or m ti a n y g   no y tbesubjectto presentations. the  same level of internal controls  ☑sde dcost sporisk inamednoscuit 2b.yehtdnatsrednU abmresunmin f sco cialinanm gf syet or s mt ng e  h ortirep s. If you espo given the t C o o t st h  r e c e u e tt c i o n n g o h m as i  c b c e r e is n i  s a . ke r y nse isisre,nscoid ybd oce  imonrcc so,ne eatescretiinethateru o cn yddrlaet'aavenh responseof  paniestothe typesofearningsguidanc erthe most com  e the a e u c d o i n t o co mi m c m cr i i t s t i e s e . s E h v o er u y l  d b b o e a  r a d s a ki n n d g   i c n o r m ev p i a e n w y i i n s g s  u 2 e 0 s 1 . 0 E f n in g a a n g c e i  a e l arly-on m wh o e d t e h l e h r a t s h b e e c e o n m c p h a a n n y g ' e s d d  elivery disclosures,particularlyanynew permanently, and whether a "cost-  disclosures becoming effective reduced" business model can be  due to new or revised accounting sustained. Did we cut too much?  standards. If relevant, understand Howquicklycanwerestorecritical t o h f e s c o o ci m al p m an e y d ' i s a   p n o e li t c w y o o rk n s t  h s e u  c u h s a e s Twitter and LinkedIn to reach investors and customers.

☑4. Continue to monitor fair value issues, impairments, and managements assumptions underlying critical accounting estimates.   These issues, together with going-concern challenges, will continue to be a major area of focus for audit committees. At the same time, there are important new financial reporting developments -- including changes in accounting for financial instruments, revenue recognition, business combinations and joint ventures that may require the audit committee's attention. Set aside time at each audit committee meeting for an in-depth discussion into the specific financial reporting developments impacting the company.  ☑5. Rethink the audit committees role in risk oversightwith an eye on narrowing the scope. The tremendous focus on risk today provides an opportunity for the board to reassess the audit committees (and the full board and the other standing committees) role in overseeing risk. Does the audit committee have the expertise and time to deal with strategic, operational, and other risks? Is the expertise of other board members being leveraged? Audit committees already have a lot on their plates with oversight of financial reporting risks. 1

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Contact us For more information, please contact:  Risk & Compliance, KPMG China Partner-in-charge Stephen Lee Tel: [phone] [e-mail] .hk  Internal Audit, Risk and Compliance Services, KPMG China  Northern China Helen Wang Partner Tel: [phone] [e-mail]  Benjamin Ng Director Tel: [phone] [e-mail]  Central China Michael Lai Partner Tel: [phone] [e-mail]  Christine Yau Partner Tel: [phone] [e-mail]  Southern China Patty Wu Partner Tel: [phone] [e-mail]  Helen Li Partner Tel: [phone] [e-mail]  

☑6. Ensure internal audit is properly☑9. Help link change + risk. Monitor focused and fully utilised. critical alignments. Help refine internal audit's role, and  Change  creates risk. During times of  focus the activities of internal audit dramatic change, the risk of on key areas of risk, as well as risk misalignment of, in particular , the management in general. Internal company's strategy, goals, risk, audit is not accountabl e or controls, compliance, incentives, and responsible for risk management, but  people,  rises exponentially. Given the it should provide added assurance to  audit  committee's role in overseeing the audit committee in regards to the risk, internal controls, compliance, adequacy of the company's risk and ultimately the impact of management processes. Internal significant changes on the company's audit is most effective when it is financials, it is in a unique position to focused on risk. Accordingly, the help reduce the risk of misalignment. internal audit plan should be risk-   based and focus on critical risks to ☑10. Take a fresh look at the audit the business, not merely on committees composition and compliance and financial risks. leadership.  The audit committee's effectiveness ☑7. Prepare for the potential impact and accountability hinges on of key public policy initiatives on meaningful self-assessments of the compliance, risk, and governance audit committee, both as a group and processes. as individual members. Take a hard Major public policy chan  ges,  for  look at the committee's composition, example the environment and  independence, and leadership. Is financial services regulation for sales  there a need for a "fresh set of eyes"? practices, capitalisatio  n, liquidity and   g w e ill n i e m ra p l a ri c s t k a m br a o n a a d g  e cr m os e s n - t, s  e g c e ti n o e n r  a o ll f y   By KPMG China companies and industrie  , and may  s KPMG China prepared this document i tr m an p s o p s a e r a e d n d c i y ti  o a n n a d l   c re o p m o p r l t i i a n n g c , e for board members, audit committee members and management of obligations. These, in turn, will Chinese enterprises. The information r r i e s q k, u  i a r n e d n g e o w v  e o r r n m an o c d e if  i o e v d e c rs o i m gh p t l  iance, contained within is only for general discussion of the matters included processes. and should not be relied upon as  advice for any particular enterprise ☑.8ehToceimon oer s o e c r  p n tup m ot c iapl scrueiinsnits su oc na  dcne because no consideration is given to vigilant. individual facts and circumstances, t a r T n h e t e m i  - e e fr c n a o d u no o d u  s m p i r c p o  re d gr s o a us w m t r n s u e .   r o B n n e has placed rirpteenotseri.es atregrym r  e ro p flychco ent avdluwhi  r m e a s n ul a t g s; e a m t e t n h t e   t s o a a m c e h  i t e i v m e e o , p c e o ra t ti c n u g t  s This document should be read in andworkforcere ductionsma s yhave conjunction with the relevant standard, rules, regulations, exacerbatedt a h n e y s  e t  r p e r a e t s e s d u i r t e s s.How guidelines and/or authoritative e ha m s p t l h oy e e c e o s m ? p Howdotheythink dcohTsitsimune thE  boshangli unnorop.ntmece Cnedinennih.ewsirtt they've been treated? A Where there is inconsistency comprehensive review of the company's anti-fraud and complianc  e between the two versions, the programmes, including its Foreign English version shall prevail. Corrupt Practices Act c ompliance programme where relevant, may be in order. Having the right tone at the top, and throughout the finance organisation, is critical.

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