On the audit committee's agenda

Aligning the disclosure committee in the era of disclosure

May 2024

Disclosure continues to be a critical topic for the audit committee in the coming year, and likely beyond. As disclosure committees align to the evolving disclosure landscape, leading practices and operational enhancements, such as charter updates, membership refresh, and committee procedures, should be considered.

This edition of Deloitte’s On the audit committee’s agenda offers considerations for audit committees regarding the establishment and oversight of disclosure committees.

Looking ahead: The audit committee agenda in 2024

January 2024

This edition of Deloitte’s On the audit committee’s agenda highlights topics likely to figure prominently on agendas in the coming year. Among the areas discussed are regulatory matters; AI and other technology and cybersecurity risks; finance talent; and audit committee effectiveness.

Who’s in charge: The audit committee’s role in ethics and compliance oversight

April 2023

The audit committee’s remit with respect to ethics and compliance is broad and deep and may be difficult to address without focusing on the most important risks. This issue of Deloitte’s On the audit committee’s agenda examines the committee’s responsibilities in monitoring ethics and compliance activities and overseeing the effectiveness of related policies. 

Emerging trends in ESG governance for 2023

January 2023

Companies increasingly are opting for ESG governance frameworks that allocate responsibilities to various combinations of board committees and the full board. Given the proposed SEC rule on climate risk disclosure and its likely impact on financial reporting, audit committees should understand trends that are emerging in climate reporting and the broader ESG governance landscape.

Strategic intelligence: An integrated approach to ERM for a new era of emerging risks

October 2022

Given the rapid rate at which risks are emerging and evolving, a dynamic approach to enterprise risk management (ERM) underpinned by strategic intelligence is no longer an aspiration for many companies. It is an imperative. As a focus on risks, opportunities, and performance related to environmental, social, and governance (ESG) issues intensifies across the marketplace, a dynamic approach to ERM powered by strategic intelligence can help integrate ESG into the business.

Emerging fraud risks to consider: ESG

July 2022

Many audit committees are highly focused on the risk of financial statement fraud, but a case is growing for audit committees to expand their discussion of fraud risk to encompass a growing variety of environmental, social, and governance (ESG) issues. ESG-related topics increasingly appear on audit committee agendas and factor into financial reporting discussions, but they tend to arise less often in the context of discussions about fraud risk.

Investors continue to demonstrate interest in understanding risks related to ESG issues, which is helping fuel regulatory focus on reporting and disclosures. The SEC has already issued proposals to expand disclosures related to cybersecurity and climate issues, and further proposals are expected in areas such as human capital. These proposals are likely to significantly increase the scope of information that will be included in regulatory filings in the coming years.

What’s on the horizon for 2022?

February 2022

The past year has made it clear that many of the fundamental changes to organizations that were brought on by the pandemic are here for the long haul. The impacts of widespread remote work, accelerated digital transformation, and shifts in talent dynamics have been far-reaching, and the full scope of their effects—and related risks—is not yet certain.

The audit committee’s role in overseeing risk and financial reporting is more important than ever in this evolving context, as organizations navigate increasingly complex reporting requirements and a shifting regulatory landscape. Effective oversight requires committee members to stay up to date on these changes while understanding how emerging risks may impact the organization. This publication highlights five areas of focus—financial reporting and controls; enterprise risk management; environmental, social, and governance; cyber risk; and digital finance transformation—that likely will be recurring topics of discussion for audit committees in 2022. While these topics cover only certain aspects of audit committee responsibilities, their importance and prominence on agendas is reflected in audit committee member survey responses captured in the recent Deloitte and CAQ Audit Committee Practices Report. Each topic highlighted also includes probing questions audit committees can consider posing to management to help them stay ahead of issues, navigate pitfalls, and fulfill the organization’s responsibilities to investors and other key stakeholders.

Navigating the ESG journey in 2022 and beyond

January 2022

The conversation within and beyond the boardroom around environmental, social, and governance (ESG) is rapidly maturing. In recognition of the important role ESG plays in driving long-term value creation, more and more boards are focused on and are disclosing how their governance structure is evolving to consider ESG more intentionally. Having a defined plan for overseeing the integration of ESG and the interconnectedness across the pillars of "E", "S", and "G" into strategy and disclosure helps demonstrate the significance and prioritization of ESG efforts from the top, to both investors and broader stakeholders.

Amid this shift in board governance, investors continue to increase expectations on climate and ESG matters, as noted by the number and breadth of shareholder proposals on related issues in the 2021 proxy season. As investors update and finalize their proxy voting guidelines for 2022, there is the potential for more votes to be cast against board directors who do not demonstrate an adequate understanding of ESG and sufficient disclosure.

Change is also coming quickly on the regulatory front. The SEC has disclosed its regulatory agenda and has included four important areas that fall under the ESG umbrella: climate change, cyber risk governance, board diversity, and human capital management; proposed rules are expected in early 2022. The SEC also has begun to focus more on ESG-related comment letters. In late September, the commission issued a “Dear CFO” letter that provided a sampling of the types of comments issued about climate change and sustainability disclosures, with a particular emphasis on the consistency of climate-related risk disclosures and the relevance to financial reporting.

In addition, there has been significant movement toward the global convergence of standards. The IFRS Foundation announced at the UN Climate Change conference in Glasgow in early November the formation of the International Sustainability Standards Board (ISSB), which will consolidate the Climate Disclosure Standards Board and the Value Reporting Foundation (which includes the Integrated Reporting Framework and Sustainability Accounting Standards Board (SASB) Standards) by June 2022. The global ISSB standards are intended to elevate sustainability standard setting to be in line with that of financial reporting and accounting, and will promote transparency and consistency in sustainability disclosures to better inform decision-making for users of general-purpose financial reporting.

Other standard-setting entities enhancing their involvement in ESG include FASB, which has released a staff educational paper on the intersection of ESG matters with financial accounting standards; and the Commodity Futures Trading Commission, which has established a climate risk unit. With the pace of the ESG developments expected to accelerate rapidly in 2022, company management and boards should be focused on enhancing governance structures and the control environment around managing, and overseeing, ESG risks and opportunities and delivering high quality disclosure.

The strategic audit committee: Navigating 2021

February 2021

It’s been said a lot: 2020 was a difficult year. The effects of the COVID-19 pandemic have led to unprecedented economic conditions and continued uncertainty in the business environment. This has resulted in increased complexities and risks that may have long-term implications. Seemingly overnight, employees began working virtually, and boards and audit committees had to find new ways to engage with management and their auditors in order to effectively execute their oversight responsibilities.

As companies continue dealing with the impact of the pandemic, the audit committee’s agenda and its processes will need to remain flexible to address issues and challenges as they arise. To provide effective oversight and help management navigate these challenging times, audit committees need to ask direct, targeted questions to understand management’s processes and decisions, as well as alternatives that were considered when addressing key issues.

We’ve been operating in this environment for three quarters and have learned much. Audit committees will continue to face an expanding agenda, and prioritization will be critical. While the role of the audit committee is vast, this publication focuses on two areas of oversight that may be critical for audit committees in the upcoming year: financial reporting and internal controls, and risk. Our focus is on providing a set of topics and additional resources for audit committees to consider as they manage their 2021 activities.