Internal audit turns focus to risk management

Market turmoil marks turnaround of priorities for internal audit committees, says survey

LONDON – Risk management is now the top priority for audit committee members, considered ahead of traditional accounting judgement and estimates and internal controls as the credit crunch continues to bite, according to the yearly annual Audit Committee Member Survey conducted by KPMG’s Audit Committee Institute (ACI).

The survey of almost 150 UK audit committee members of public companies, and more than 1,000 audit committee members globally, on their perspectives and priorities for the year ahead, revealed less than half of audit committee members, at 46%, were very satisfied that their company had an effective process to identify the potentially significant business risks facing the company, and even fewer, at only 38%, were very satisfied with the risk reports they received from management.

Tim Copnell, ACI head in the UK, said that recession-related risks as well as the quality of the company’s risk intelligence were two of the major oversight concerns for audit committee members. “But there is also concern about the culture, tone and incentives underlying the company’s risk environment, with many saying the board and/or audit committee needs to improve their effectiveness in addressing risks that may be driven by the company’s incentive compensation structure,” he said.