The business and risk environment has changed dramatically over the past year, with greater geopolitical instability, surging inflation, high interest rates, disruption and uncertainty. Audit committees can expect their company’s financial reporting, compliance, risk, and internal control environment to be put to the test by an array of challenges – from global economic volatility to cybersecurity risks and ransomware attacks, digital disruption, talent management and retention as well as preparations for compliance with the Financial Reporting Council (FRC) Amendment Act.
Drawing on insights from our interactions with audit committees and business leaders, we’ve highlighted eight issues for audit committees to keep in mind as they consider and carry out their 2024 agendas.
Stay focused on financial reporting and related internal control risks – job number one
Focusing on the financial reporting, accounting, and disclosure obligations posed by the current geopolitical, macroeconomic, and risk landscape will be a top priority and major undertaking for audit committees in 2024. Key areas of focus should include:
Forecasting and disclosures
Among the matters requiring the audit committee’s attention: Disclosures regarding the impact of increase in fuel price, policy uncertainty, challenges related to foreign exchange availability, currency devaluation, supply chain disruptions, cybersecurity risk, climate change, inflation, interest rates, market volatility, and the risk of a global recession. Additionally, the committee should oversee the preparation of forward-looking cash-flow estimates, assess the impairment of non-financial assets such as goodwill and intangible assets, evaluate the impact of events and trends on liquidity, review the accounting treatment for financial assets, particularly their fair value, and consider matters related to the organisation’s going concern.
As businesses navigate challenges in the current environment, regulators are emphasising the importance of making well-founded decisions and maintaining transparency. This includes the need for contemporaneous documentation to demonstrate that the company applied a thorough and rigorous decisionmaking process.
Due to the dynamic nature of the long-term business landscape, there might be a heightened necessity for more frequent disclosure regarding changes in judgments, estimates, and controls.
Please click here to download the full article.
