the-audit-committees-auditor

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photo by najlah feanny hicksVerbatim | James P. LiddyThe Audit Committee’s AuditorShortly after his appointment as vice chair-Audit How has the audit committee’s role evolved? The newly at KPMG LLP, the U.S. member firm of KPMG Harry Truman may have said it best: “The appointed vice International, Jim Liddy sat down with NACD buck stops here.” I’ve heard more than one audit chair-Audit for Directorship for an interview that delved into his committee member say that if an issue is compli-KPMG LLP on the mission, aspirations and how the external auditor’s cated and requires a lot of time and focus, it usu-role has evolved, particularly since Sarbanes-Oxley ally lands on the audit committee’s plate. The evolving role of (SOX) and the economic crisis. The financial ser- challenges and priorities that companies face the auditor, the vices sector is one of his sweet spots. So too is the keep increasing, and executives and boards can’t relationship with role of the audit committee, which Liddy is focused simply give matters a cursory review. The audit the board and squarely on, both as an auditor and a member of committee’s role and scope of oversight activi-what lies ahead. an upcoming Blue Ribbon Commission (BRC) on ties will vary by company and by industry—but Audit Committees to be published this fall by the there’s a “great reassessment” taking place now…NACD. many audit committees are reassessing their role in risk oversight. Where are board and ...

Informations

• Publié par: Ustlo
• Nombre de lectures: 38
• Langue: English

Extrait

Verbatim|   James P. Liddy

The newly appointed vice chair-Audit for KPMG LLP on the evolving role of the auditor the relationship with the oard and what lies ahead

The Audit Committee’s Auditor

Shortly after his appointment as vice chair-Audit at KPMG LLP, the U.S. member firm of KPMG nternational, im Liddy sat don ithNACD Directorship an intervie that delved into his for mission, aspirations and ho the eternal auditor’s role has evolved, particularly since Sarbanes-ley S and the economic crisis. he financial ser - vices sector is one of his seet spots. So too is the role of the audit committee, hich Liddy is focused suarely on, both as an auditor and a member of an upcomin lue ibbon ommission  on Audit ommittees to be published this fall by the A.

mmittee oversiht heir audit commit -  business environ -  what they do and it committees are nancial reporting. ight about the asso - issues? ow much tegy play into the he timing of the  on Audit om - uldn’t be better. t important oppor-  audit committees ine how they do do—and to ramp-  effectiveness. he port will offer  les to help guide committees—and  management and it professionals sup - ting them—in ir oversight of  ncial reporting related risks. len- how-to’s and practi- ggestions.

o has the audit committee’s role evolved arry ruman may have said it best “he buck stops here.” ’ve heard more than one audit committee member say that if an issue is compli - cated and reuires a lot of time and focus, it usu - ally lands on the audit committee’s plate. he challenges and priorities that companies face keep increasing, and executives and boards can’t simply give matters a cursory review. he audit committee’s role and scope of oversight activi - ties will vary by company and by industry—but there’s a “great reassessment” t king place n  a ow… many audit committees are reassessing their role in risk oversight. e’re seeing the full board increasingly taking on responsibility for oversight of maor strategic risks facing the business with the audit committee focus - ing suarely on financial reporting and related risks. n some cases, the audit committee is overseeing the riskprocess, and serving as a catalyst to help the board get a handle on risk. o has the auditor and the audit committee dynamic chaned, especially since S he professional bond or the relationship be- tween the external auditor and the audit commit- tee has become much stronger in the post- era. he level of dialogue has been raised, as well as the uality of communication, and most importantly, the uality of understanding about the company and its risks. Audit committees get a lot of informa- tion sent their way, and one of the things  often hear people ask is, “ get a lot of data, but am  really getting the right information?” ne of the roles the external auditor can play is helping to bridge the datainformation gap. As a best practice, we spend time with the A hair, or the whole audit committee, before their committee meeting—to discuss what we think are the more important elements and uestions they should consider. nstead of listening to a presenta- tion, they can have a more meaningful dialogue about the issues at hand.

Post-financial crisis, hat learnins from the fi- nancial services sector can be applied to business- es in other industries A lot of people overestimated the resilience and strength of liuidity and capital resources in the market. hey assumed that there would always be access to capital and liuidity to fund ongoing business activities. eople also made some very gen - eral assumptions on how products would perform and how service activities would develop based on historical experience, which is not always the best predictor. A lot of companies got involved on the pe - riphery of their core business. hose activities drew a disproportionate share of capital, and most impor - tantly, did not always operate within an expected risk threshold—and the commensurate financial state - ment impact was particularly large. ow, companies are saying, “et’s decide what we want to be known for in the marketplace and let’s make sure we deliver that service better than anyone else. et’s do things in a measured and thoughtful fashion and make sure that we truly understand the inherent risk in our products and se i ” rv ces. hat’s on the horion for chanes in financial re- portin and to financial statements here are at least a doen proects at the Finan- cial Accounting tandards oard FA right now with a view toward converging with nternational Financial eporting tandards F. ome of these issues are particularly challenging, and the FA may end up looking at things in a different fashion than the international community. ompanies need to understand the FA pro- posals, and get involved in the comment letter pro- cess, so that from a deliberation perspective, the FA gets the best information from the market- place. n terms of financial statements,  think the ues- tion that should be asked is whether financial state- ments should simply be a snapshot of what was, a rear-view mirror look at how things shaped up last year? r should financial statements and related dis- closures be part of a process that includes a look at the financials as well as a forward-looking discussion of risks and other issues facing an organiation?

hat do you envision for the Audit ommittee nstitute A oin forard e’ve always wanted A to provide a forum for audit committee and board members to liaise with their peers and get insight and perspective as to how people are dealing with common issues and chal - lenges, and to feed that information back into the marketplace. ssues like risk, uncertainty posed by economic and public policy environments, financial statement issues, and interestingly,  risk—those are some of the issues that audit committee members have highlighted as their most pressing concerns, and that’s what shapes the dialogue at A forums. o do you drive efficiency in the audit process ust like companies have to take a hard look at what they do and why they do it, we need to do the same thing from an external audit perspective. ow do we enhance the professional communication process with our client? e need to focus on three primary things for our clients First, rigorous execution of professional standards —our credibility and the credibility of financial statements depends on it. econd, timely and pro- active dialogue regarding salient risk matters and those other items impacting financial statements and related disclosures. his needs to be an ongo- ing dialogue. he accounting profession needs to overcome a perception of being stand-offish and dogmatic. And, third, active analysis of critical udgments and factors impacting financial state- ments—we need to understand how management made its udgments and how certain decisions affected the financial statements. hat do you do hen you’re not orin ell, my full-time ob when ’m not working is my family. y wife and  have four children, and we try to spend as much time with them as we can. he kids have an extremely busy schedule, often- times every bit as busy as my own. o any chance  get to spend time with them,  enoy it to its fullest. D o read more of th tere th jame  ldd peae t dretorhpom

ecutive Action The four fundamentals of KPMG’s usiness strategy according to ames P Liddy   n rofeoam ad tert “er mp do the rht th  the rht a—eer e da” n e a empoer of hoe r peope “ repreet or te eta apta ad e foter a eromet here peope fee that the hae a reat pae to bd a areer” n at roth “e at to hae the rht et ad the rht er e ”   n h oba ad at oba “ ate  e oper the oba maretpae ad e e ot to dpa ’ or oba treth ad ote ”

september 2010wwwdirectorshipcom     21