Setting the 2012 Audit Committee Agenda Presentation · Agenda Top Ten Major Challenges Facing...

January 11, 2013

Setting the 2013 Audit Committee Agenda

© 2013 Protiviti Inc. CONFIDENTIAL: This document is for your company's internal use only and may not be copied nor distributed to another third party.

2

Objective

• Discuss major challenges companies will likely face over the next 12 months

• Summarize top-of-mind issues facing many organizations and their key stakeholders

• Identify key topics which will be incorporated into many audit committee agendas

Today we will:

While the economic environment has shown signs of stabilizing over the past two years, the

seas still look somewhat choppy for 2013.

Presenter

Presentation Notes

�


3

Agenda

Top Ten Major Challenges Facing Businesses

2013 Mandates for Audit Committees – Enterprise, Process and Technology Issues

2013 Mandates for Audit Committees – Financial Reporting Issues

Role of Internal Audit


4

Agenda

Top Ten Major Challenges Facing Businesses


5

Regulatory changes and increased scrutiny may affect operations

Major Challenges

1

• The pace of regulatory and legislative change is increasing significantly across industries

• Failure to comply can result in severe consequences • Regulatory risk is the second most important risk after economic

slowdown • Protecting reputation and brand is everything

Senior management must pay attention to the regulatory environment


6

Questions to Consider Regulatory Change

What key non-home country compliance requirements do we have?

Does the US FCPA impact us in any way?

Are we affected by the UK Bribery Act?

How will our US bank relationships change as a result of the Dodd-Frank Act?

What new requirements might emerge?

What are our most critical compliance requirements?

Presenter

Presentation Notes

�


7

Major Challenges

• Companies are looking for new ways to increase revenues in a volatile, competitive world.

• Expansion can be organic or through M&A activity.

2 Current market economic conditions may not present significant growth opportunities


8

Questions to Consider Growth

If M&A is a consideration, is the target company an appropriate fit? Has the due diligence been done to ensure a smooth integration?

How can we exploit our current market strengths via geographic, product, channel or customer expansion?

What is our key strategic differentiator?

Presenter

Presentation Notes

�


9

Major Challenges

• With emerging economies expected to dominate global growth, succeeding in these markets has become a strategic imperative Doing business in uncertain markets creates new risks

3 Adjusting to volatile global economic and political conditions


10

Questions to Consider Geopolitical Dynamics

How do we identify and manage key country compliance requirements?

How do we stay up to date on key country political and economic changes?

What is our full international/global risk profile, and have we assessed our global footprint risks?

Can we transfer to other countries high performing personnel with valuable experiences?

Do we know the true cost of operating in certain countries?

Presenter

Presentation Notes

�


11

• Companies that discover how to harness the experience and wisdom from the semi-retired workforce may enjoy a competitive advantage over those that don’t

• Skilled manpower and project management capabilities help ensure that project investments are productive

Major Challenges

4 Succession challenges and attracting, retaining and developing top talent


12

Questions to Consider Talent

How do you provide employees with feedback on the level of their performance?

What process do you use to provide employees with guidance on performance expectations for their roles?

Does the company have a formalized succession plan for key positions?

What process or program do you have to identify and manage high-potential talent?

Presenter

Presentation Notes

�


13

Major Challenges

5 Achieving organic growth through existing customers

• Understand customer loyalty and defections and their effects on corporate profits Every business recognizes the value of long-term customers

• In many industries today, even satisfied customers can defect at a high rate

• Companies must show concern for customer needs in all of their actions in managing customer relationships, including back office activities


14

Questions to Consider Customer Loyalty

Do we properly recognize our long-term customers?

Do we utilize the knowledge we have of our customers?

What is our typical customer profile? Will they create enough growth?

Do our business processes and activities focus on customer loyalty?

Presenter

Presentation Notes

�


15

Major Challenges

• Recent high-profile breaches have demonstrated that no one is immune to a determined hacker

• New regulations impose tougher penalties on organizations for data breaches

• Increased exposure of sensitive data and networks to new threats require organizations to focus on the following to avert the risk of security attacks: Thoughtful privacy policies Ensuring adequate and necessary controls

6 Ensuring privacy/identify management and information security protection


16

Questions to Consider Privacy and Security

If a privacy debacle were to occur, could the resulting loss of customer trust damage the organization's market valuation, revenue stream, or public image?

Does the organization have privacy and data protection risk management processes and tools in place?

Does the organization operate in any areas of the world where they are required to comply with privacy laws and regulations protecting the rights of the citizens in those jurisdictions?

Does the organization treat the personal identifying information collected from individuals with a high standard?

Presenter

Presentation Notes

�


17

Major Challenges

• The pace of change from a competitive, regulatory and technological perspective continues to accelerate.

• Companies much have the flexibility to react and make the adjustments necessary.

• Successful change relies upon buy-in from middle and lower level management.

7 Managing organizational resistance to change


18

Questions to Consider Change Readiness

Are initiatives consistently aligned and on-going communication provided regarding organizational success?

What is the impact of the company’s culture on change readiness?

Has the need for change and the company’s strategy been communicated to all levels within the organization?

What is the current state of change readiness within the company?

Presenter

Presentation Notes

�


19

Major Challenges

8 Ability to meet performance expectations

• Improving quality, time, innovation and cost performance is now a strategic imperative

• Know how the competition is doing • Improving the effectiveness and efficiency of business processes

and the upstream and downstream components of the value chain • Maximizing investments in ERP software applications


20

Questions to Consider Business Performance

What measures are used to determine efficiency or effectiveness?

Is the supply chain efficient and all tools available used to leverage and integrate with vendors?

Does the company maximize the use of technology?

How do we monitor, benchmark and analyze our competition?

How efficient are the company’s support organizations?

Presenter

Presentation Notes

�


21

Major Challenges

9 Ability to respond to an unexpected crisis which would impact reputation

• Know the types of crises which may arise • Assess the impact of a potential crisis

Understand the external and internal factors Preparedness is an organizational , not a PR, challenge


22

Questions to Consider Crisis management

Is a process in place to ensure effective customer communication?

Is there a periodic updating of risks and expected management response?

Does the company have an active social media monitoring process?

Does the company have a crisis management program?

Presenter

Presentation Notes

�


23

• Organizations are handling an increasingly high volume of data • Companies are also investing heavily in business intelligence (BI)

tools Indicates a need for effective data governance to ensure data quality

and integrity

• Opportunity to use data and information available in the organization more effectively to make timely and informed decisions

• Opportunity to harness the ever-expanding collection of data to improve the customer experience

Major Challenges

10 Improving information for decision-making by understanding “big data” and focusing on data management and analytics


24

Questions to Consider Data Management and Analytics

What are our most valuable pieces and sources of information?

Are we using our ERP systems most effectively?

Are we effectively managing this data?

What key information don’t we have?

What data drives our key decisions?

Presenter

Presentation Notes

�


25

Agenda

2013 Mandates for Audit Committees – Enterprise, Process and Technology Level Mandates


26

2013 Mandates for Audit Committees

Update the company’s risk profile to reflect changing conditions 1

• Broaden the assessment with an end-to-end enterprise view of the value chain

• Ensure management’s risk assessment provides insight on crisis management procedures

• Assist the board in evolving risk oversight in a changing business environment


27


Oversee the capabilities of the finance organization and internal audit 2

• Make sure the CFO organization and internal audit function are keeping pace with the changing organization and have the resources they need to succeed


28


Continue to provide oversight for significant changes in the overall control environment

3

• Be alert for warning signs regarding the enterprise’s tone at the top and culture


29


Understand how new technological developments and trends are impacting the business

4

• Understand the implications of technological innovations to security and privacy, financial reporting processes and the viability of the company’s business model


30


Take a fresh look at the compliance infrastructure 5

• Assess the company’s policies and procedures in dealing with new and pending laws, regulatory changes, regulator reviews and other ongoing developments

• Review recent actions of regulators with respect to enforcement actions and understand implications for your company’s compliance practices.


31


Assess committee effectiveness 6

• Evaluate whether committee composition and expertise is sufficient in light of the changing environment and company risk profile


32

Agenda

2013 Mandates for Audit Committees – Financial Reporting Issues


33


Work with the external auditors to upgrade the communication process

7

• Understand what the communication requirements are of the external auditors.


34


Be aware that the auditor’s report may expand in the near future 8

• The auditor’s report may incorporate topics the auditor addresses with the audit committee.


35


Inquire whether PCAOB inspections impact the audit approach 9

• Understand the feedback from the PCAOB inspections on your audit firm and how that impacts the audit approach which they have at the company.


36


Monitor developments regarding mandatory auditor rotation 10

• Auditor rotation is still under consideration by the PCAOB as a method of increasing auditor effectiveness.


37


Expect action on the convergence to IFRS 11

• If applicable, inquire about the company readiness as the US FASB issues new standards over the next two years.


38

Agenda



39


• Incorporate key risks into the internal audit plan

Is privacy and security adequately covered?

Should data integrity or governance be assessed?

Have customer loyalty programs been reviewed?

• Work with the external auditors and legal counsel to understand regulatory issues which may need to be incorporated into the audit plan

Does the compliance program need to be reviewed for effectiveness?

• Understand the corporate strategy and ensure appropriate involvement

Is internal audit involved in due diligence for potential acquisitions?

Do new product lines, geographies or customer groups create a different level of risk which will need to be assessed.

Presenter

Presentation Notes

�


40

Thank You!

Powerful Insights. Proven Delivery.®

Phone: +1 404.926.4359

[email protected]

Atlanta, GA

Bonnie-Jeanne Gerety Managing Director


41

Thank You Thank You

Setting the 2012 Audit Committee Agenda Presentation · Agenda Top Ten Major Challenges Facing...

Documents

Transcript of Setting the 2012 Audit Committee Agenda Presentation · Agenda Top Ten Major Challenges Facing...