The scope of audit committee oversight continues to creep. Given the rapid rate at which risks are emerging and evolving, many boards are taking a fresh look at committee structures and practices to determine whether they are keeping pace with shifting responsibilities and priorities. For audit committees, this can mean expanded responsibilities that go beyond overseeing financial reporting and internal controls, ethics and compliance programs, and external and internal audit. Today, many audit committees are charged with overseeing additional areas of emerging and intensifying risk, such as cybersecurity; enterprise risk management (ERM); and environmental, social, and governance (ESG) reporting.
The expansion of the audit committee’s role has in turn raised questions about audit committee composition, prompting us to examine it more closely in this year’s survey. Audit committees may need more expertise in certain areas, but they are simultaneously wary of bringing on narrowly-focused subject matter specialists. Despite having more topics on their agendas, audit committees still must perform their core oversight duties as well as understand the interrelationships among the various areas of risk. For these reasons, boards often prefer to compose their committees with strategic thinkers, who may or may not have deep expertise in a particular area.
Against this backdrop, audit committee members often want to understand what their peers are focusing on in terms of priorities, how they are adjusting the composition of their committees, and if there are leading practices they should employ within their own organizations. To this end, we are pleased to provide you with the second edition of the Audit Committee Practices Report, a collaborative effort between Deloitte’s Center for Board Effectiveness (Deloitte) and the Center for Audit Quality (CAQ). A total of 164 individuals participated in the entire survey (with higher response rates for certain questions, up to a maximum response rate of 181) from predominantly large (80% > $700 million), U.S.-based public companies. The survey inquired about:
- Audit committee composition
- Areas of oversight
- Key risks
- Audit committee practices
We believe this report provides insight into shifting priorities as well as trends and practices related to audit committee composition. The survey results and related analysis can also serve as a benchmarking resource for gauging your own committee’s development.
We hope you find the report to be helpful in responding to a dynamic and highly demanding corporate governance environment.