8 top priorities for audit committees

Between increased regulatory scrutiny and growing investor and customer expectations, ESG standards are changing quickly. Creating a viable ESG strategy is more important than ever if companies want to keep up with – and even get ahead of – these changes.

The regulatory environment is changing quickly, and it can be hard for audit committees – and organizations – to keep up with what these changes mean and how to implement them. In addition, with these changes comes an increase in scrutiny around regulatory compliance.

The world around us is changing quickly, and while the pandemic might have accelerated digital transformation and innovation, there’s no going back. From mass adoption of working from home, online banking, and virtual consultations to lower demand for in-person experiences, it’s vital that businesses keep up with the changes. And it’s important for audit committees to understand the implications of these changes – both now and in the future.

Audit committees need far better scenario planning, as the scramble to respond to the pandemic and its economic fallout made starkly clear. Now, in the face of significant changes in interest rates and inflation, businesses need robust scenario planning that takes an “outside-in” approach to the potential impact of macroeconomic trends.

The current reality is anything but business as usual – and has been for quite some time. How will the operational and financial implications of the Inflation Reduction Act, inflation itself, and a potential economic recession be reflected in financial statements? Triggering events, such as deteriorating macroeconomic conditions or loss of customers, might result in impairment of inventory; property, plant, and equipment; intangibles; or goodwill that need to be recorded.

The pandemic prompted a dramatic and sudden switch to remote work for many organizations – and while some are implementing back-to-office plans, that switch is unlikely to fully reverse. Many companies had to modify firewalls and other security measures hastily to accommodate work-from-home environments, but now they need to consider how to evaluate and strengthen those measures.

Companies need long-term strategies for resilience. The largely unanticipated economic shock of the pandemic is still affecting many businesses – and now, they’re also faced with challenges like inflation, labor shortages, a potential economic recession, and changing customer decision-making habits.

While some companies still are feeling the aftereffects of the pandemic, most currently are facing rising inflation and a potential recession. Organizations considering cost-cutting measures to combat these new challenges should consider how those measures might affect the controls process, including which roles are vital to the process and how the process might need to change.