Governance in times of transition
Issues for audit committees
A cautious optimism has returned to many corporate boardrooms. Investors are moving beyond companies’ financial condition to their strategy and performance. Investors want to know whether the restructuring and cost containment programs embarked upon a year ago have improved operating performance; investors are also focused on quality of earnings and future earnings prospects. To address investor information needs, audit committees will need to focus on three areas of priority: transitioning investor attitudes from a crash to recovery mentality; the transformation of the real economy; and the conversion from Canadian GAAP to International Financial Reporting Standards (IFRS).
Deloitte’s Governance in times of transition publication explores how these factors can be addressed by audit committees. Throughout the publication, you'll find questions audit committees might ask, in addition to a practical appendix that guides audit committees through common deficiencies in financial reporting. The publication is organized in three sections:
- Meeting investor information needs addresses the audit committee’s role in ensuring disclosures provide clear, fact-based information to appease increasingly cautious and cynical investors. Audit committees will particularly need to focus on reporting performance, improving risk disclosures, compensation-related risks, the impact of the Canadian dollar, and forward-looking information
- Keeping an eye on compliance discusses the need for audit committees to broaden their perspective beyond technical compliance. To help create and sustain investors’ trust, audit committees should scrutinize compliance problems identified by regulators, disclosure policies, committees and practices, CEO/CFO certification complacency, and finance function fatigue.
- International Financial Reporting Standards (IFRS) sheds light on the risks that audit committees need to be alert to during this transition year in the conversion from Canadian GAAP to IFRS. This is a particularly timely topic, as the Canadian Securities Administrators identified disclosures of IFRS changeover plans in the MD&A as a topic that may receive greater attention in its continuous disclosure review program in 2010.
Governance in times of transition provides audit committees with a clear discussion framework for all of these issues.