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| Other Publications This section includes publications that provide audit committee members with information that may be useful in addressing audit committee, regulatory, and governance issues. For publications issued by KPMG member firms outside the U.S., please see the "International Corporate Governance" area of this site. Content in this section includes:
This publication provides an overview of the issues, perspectives, and priorities driving audit committee agendas for 2006, as discussed by audit committee members during ACI’s 2nd Annual Audit Committee Issues Conference. .
Five Guiding Principles for Audit Committees Oversight practices that work for one audit committee may not work for another; yet, certain “guiding principles” underline the effectiveness of every audit committee—even as specific oversight practices evolve to address changing risks, regulatory requirements, and corporate governance needs. Newly updated, ACI’s Five Guiding Principles for Audit Committees considers five principles that help ensure oversight practices are applied effectively—that is, by the right people with the right information, processes, and perspectives.
Audit Committee Insights 2005 Annual Digest KPMG's new Audit Committee Insights Digest is a compilation of KPMG commentary that was included in KPMG's bi-weekly electronic publication, Audit Committee Insights, over the past year. We believe that the new Audit Committee Insights Digest, with its focus on KPMG commentary, will be another source for audit committee members to gain perspectives on important audit committee issues and emerging practices. The Digest is also an excellent way to introduce the electronic publication to audit committee members who are not familiar with it.
Strengthening Governance and Accountability: Higher Education, Charities, and Other Not-for-Profit Organizations Strengthening Governance and Accountability: Higher Education, Charities, and Other Not-for-Profit Organizations provides a summary of the impact and application of the Sarbanes-Oxley Act of 2002 to not-for-profit organizations. As stated in the publication, "Sarbanes-Oxley is just one aspect of an emerging consensus that greater attention is required on the broader issue of governance and accountability [in the not-for-profit sector]." This four-page publication discusses how the provisions of Sarbanes-Oxley and other public company corporate accountability reforms are cascading to private organizations, including not-for-profits. The publication touches upon various views of both the public and private sector devoted to not-for-profit governance, including principles and guidelines from Independent Sector, as well as some specific steps that KPMG believes the boards of not-for-profit organizations should consider as they work to improve their board’s performance and the transparency of their public disclosures.
Audit committees are faced with increased expectations from many groups, including shareholders, shareholder and governance activists, regulators, the media, and fellow board members. The purpose of this document, An Approach to Effective Audit Committee Self-Evaluation, is to suggest a straightforward evaluation approach for the audit committee based on some of the broad expectations of shareholders, the ultimate group whose interests the board and the audit committee represent. We have based this approach on ACI's Five Guiding Principles for Audit Committees (see above). We encourage the members of the audit committee to consider the elements included in this document, as well as other approaches, and then develop their own tailored approach to evaluating the effectiveness of their audit committee.
GAO Forum on Governance and Accountability GAO Forum on Governance and Accountability: Challenges to Restore Public Confidence in U.S. Governance and Accountability Systems, January 2003 - On December 9, 2002, the United States General Accounting Office (GAO) convened a governance and accountability forum to discuss challenges facing regulators, the accounting profession, and boards of directors and management of public companies in effectively implementing the Sarbanes-Oxley Act of 2002 and related regulatory actions to improve public confidence in U.S. corporate governance and accountability systems. The forum focused on the four interrelated areas of corporate governance, the financial reporting model, the accounting profession, and regulation and enforcement that the accountability breakdowns have surfaced as critical areas to be strengthened. Addressing these challenges detailed in the report will involve the public, private, and not-for-profit sectors.
Impact of the Current Economic and Business Environment on Financial Reporting The Big 5 auditing firms and the AICPA released a report, Impact of the Current Economic and Business Environment on Financial Reporting (also known as the "Risk Factors" report or the Risk Alert), on January 9, 2002 that is intended to provide timely information about the current financial reporting environment; an assessment of risk factors that may be important for financial statement preparers, auditors, and audit committees to consider during the current reporting cycle; and recommendations for actions that can be taken to enhance financial reporting during the 2001 reporting year. Impact of the Current Economic and Business Environment on Financial Reporting addresses the current economic downturn, the events of September 11, and recent business failures, and includes actions that may be considered to address such financial reporting risks. Issues addressed were varied but include related parties, unusual transactions, off-balance sheet financing, materiality, and adequacy of disclosure (just to name a few). The report concludes with a "call to action" for management, auditors and audit committees, including specific actions for each to consider in striving for the common goal of high quality, transparent financial reporting. This report also included a few action items that could be taken by management, auditors and audit committees to make sure that a company's financial reporting is of the highest quality.
Blue Ribbon Committee The Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees issued its report in February of 1999. The Committee's recommendations formed the basis for regulatory changes that were adopted in the following months by the Securities and Exchange Commission (SEC), New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and the National Association of Securities Dealers (NASD). The American Institute of Certified Public Accountants (AICPA) also amended their Statement on auditing Standards (SAS) 61 and 71 in response to the committee recommendations requiring external auditors to perform quarterly reviews and modifying required communications between audit committees and their auditors.
Shaping the Audit Committee Agenda Shaping the Audit Committee Agenda was originally published by KPMG soon after the release of the report of the 1999 Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. This book from KPMG continues to be a valuable resource to audit committee's considering their role in the overall corporate governance structure.
Analysis of the 1999 Audit Committee Regulations KPMG's Analysis of the New Audit Committee Regulations includes a summary of the regulations, consideration of their impact, reactions from corporate board members, excerpts from the final regulations, comparison of the final rules to those initially proposed by the Blue Ribbon Committee and tools developed by the Audit Committee Institute to assist with implementation of the new rules.
At the request of former SEC Chairman Arthur Levitt, the Public Oversight Board (POB) appointed the Panel on Audit Effectiveness in October 1998 to assess whether independent audits of the financial statements of public companies adequately serve and protect the interest of investors. The eight-member panel and its staff, headed by Shaun F. O'Malley, former Chair of Price Waterhouse LLP, conducted a comprehensive review and evaluation of the way independent audits are performed, and assessed the effects of recent trends in auditing on the public interest. The Report and Recommendations of The Panel on Audit Effectiveness (now commonly referred to as the O'Malley Panel or the Panel) was released by the POB in late August 2000. The Panel emphasized in its conclusion that "while many specific recommendations are made for improvements in the conduct of audits and governance of the profession, our report demonstrates that both the profession and the quality of its audits are fundamentally sound. The Panel believes the recommendations in this report will result in more effective audits that improve the reliability of financial statements, enhance their credibility, contribute to investors' confidence in the profession, and improve the efficiency of the capital markets." The over 200 specific recommendations were addressed primarily to auditing and accounting standards setters, audit firms, and the SEC Practice Section of the AICPA. Additional recommendations were addressed to audit committees, the SEC, and others, including the Independence Standards Board. The inclusion of recommendations addressed to audit committees in the Panel's study of audit effectiveness acknowledges the significant impact that strong and independent audit committees have on the effectiveness and independence of the external auditor. The O'Malley Panel stated that it strongly supports "more proactive audit committees and the development of stronger relationships between boards of directors (and their audit committees) and auditors that recognize that the auditors are ultimately accountable to the board of directors and audit committee as representatives of the shareholders." This is consistent with the existing requirement that audit committee charters specify this "accountability" of the external auditor to the board and the audit committee. In May 2001, during a speech at the 20th Annual SEC and Financial Reporting Institute Conference, Lynn Turner, then Chief Accountant of the SEC, stated: "To improve the effectiveness of audits, we need to ensure that auditing firms and the Auditing Standards Board fully implement these recommendations on a timely basis. To that extent, I have asked the Public Oversight Board to report publicly on the progress made on the O'Malley Panel's recommendations." Click here to link to the Public Oversight Board's Panel on Audit Effectiveness Web site.
The Business Lawyer: How to Really Make Audit Committees More Effective This May 1999 article from The Business Lawyer, Vol. 54, "How to Really Make Audit Committees More Effective," authored by John F. Olsen, includes an informative and descriptive "Ten Rules for Really Effective Audit Committees." This 15-page article also details some now-historical background impacting audit committees in the introduction, including the Blue Ribbon Committee and The Treadway Commission.
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