KPMG WEIGHS IN ON AUDIT COMMITTEE ISSUE
KPMG LLP recently released Shaping the Audit Committee Agenda, an examination of the modern audit committee.
The KPMG report stresses the importance of risk management when considering the goals of the audit committee. It expands upon the recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees (News & Views, April 1999) and attempts to offer more specific advice on integrating its objectives.
One of its major themes is keeping abreast of current and emerging issues. Such issues will undoubtedly vary from company to company, but being aware of them allows an audit committee to play an active role in creating a "no surprises" environment. This environment in turn reduces the likelihood that risk factors will become problems.
The KPMG report advises that audit committees act on the Blue Ribbon Committee's recommendations now, rather than wait for finalization of the particulars of regulations. If a cultural change within the committee is required, the sooner the process of change begins, the better.
As for the audit committee itself, the KPMG report agrees with the Blue Ribbon Committee report that an audit committee's charter should be a living document: formalized, reviewed annually, and disclosed publicly. Independence of committee members is, of course, essential. The report notes that the particulars of independence may be more difficult to define at some companies, especially smaller ones, but stresses the desirability of meeting the Blue Ribbon's definition wherever possible. The report includes a sample agenda to keep committee meetings on track and provides points for self-evaluation.
The publication can obtained by contacting KPMG's Audit Committee Institute at (877) KPMG-ACI or firstname.lastname@example.org. *
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