Members' Update

Audit Committee Survey on Reporting by Management

A G100 survey of audit committee chairmen has found a generally high level of satisfaction with the quality of reporting by management on financial matters, with indication of areas for improvement around reporting of risk management and internal controls.

G100 National Executive, in conjunction with KPMG, recently undertook a limited survey of Audit Committee Chairmen of ASX top companies to gauge their level of satisfaction with reporting to audit committees by CFOs and senior executive management.

The majority of respondents are very satisfied with the quality of reporting by management on the annual report and financial reporting matters. These matters are primarily seen as the responsibility of the CFO and external audit partner.

Given the focus in recent years on IFRS transition, technical accounting matters and their impact on the financial report, this result is not surprising. It is interesting to note that some audit committee chairmen consider that the focus on compliance with technical matters tended to dilute the overall effectiveness of the audit committee.

A number of respondents have a lower level of satisfaction with the quality of reporting by management on continuous disclosure obligations, enterprise risk management and tax risk management. The majority of respondents indicated that they rely on the CFO and at least one other member of executive management (eg CEO or Head of Internal Audit) to provide information on these matters.

Similarly, the majority of audit committee chairmen are only 'Somewhat Satisfied' with the overall effectiveness of management reporting on internal controls. These matters are primarily seen as the responsibility of the CFO and Head of Internal Audit.

In light of the responses to the survey, it may be timely for CFOs to revisit the audit committee agenda with the Chairman to:

1. ensure that time spent on technical matters does not distract the audit committee from discussions about other substantive issues;
    
2. ensure that there is clarity about the respective roles of the CFO and other members of the executive team around reporting matters relating to tax risk management, enterprise risk management and continuous disclosure; and
    
3. review the manner in which issues relating to tax risk management, enterprise risk management and continuous disclosure are communicated to the audit committee (for example through the use of a standard template for reporting).

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