Access to capital top concern for audit committees

Recession-related risks, such as access to capital, liquidity and cash
management will head audit committees’ agendas during 2008.

KPMG’s global head of audit, Henry Keizer, said boards and audit committees
will ‘need to focus on management’s plans to address risks associated with an
economic slowdown.’

Keizer made the comments following a survey of delegates attending an audit
committee conference hosted by the firm, where attendees also noted the quality
of risk intelligence, as well as the tone and culture of senior management as
areas of concern.

According to survey results, 44% of conference attendees said that their
company’s processes to identify significant business risks need improvement.
Eighteen percent said the risk reports that management provides to the audit
committee are not meaningful or useful,

Sitting on a panel which looked at the priority areas of 2008, Keizer said
that audit committee members needed to understand debt situations which included
debt maturities, access to capital markets and the impact the recession would
have on a company’s supply and distribution channels.

‘Audit committees are taking a hard look at risk management processes, with a
particular focus on the quality of risk inventories and assessments, as well as
the usefulness of management’s risk reports,’ said director of KPMG’s Audit
Committee Institute, Edward Smith.

‘The one-two punch of the sub-prime lending crisis and the economic downturn
has put tremendous pressure on companies, and as a result, audit committees are
paying close attention to the culture of the organization and its incentive

‘The pressure to maintain performance and meet expectations during an
economic downturn, carries with it some increased risks, such as the risk of
earnings management, and overly aggressive budget-cutting. Audit committees also
need to understand the behavior and risks that incentive compensation plans
encourage,’ said Smith.

Further reading:

Investors blast credit crunch knowledge gap

Citigroup investor challenges audit committee

Related reading