Audit Committee Members: More Clarity Needed by Management on Financial Issues

Audit committee members attending a KPMG conference overwhelmingly said that the recent financial crisis had changed the nature of oversight by the board of directors and/or audit committee. Specific concerns: Over half felt that the Board of Directors at best did an adequate job of challenging management risk perceptions, half felt that management disclosure on accounting assumptions or estimates was insufficient and three out of eight felt that management forecasts of earnings and cash flow was adequate at best. Overall, audit committee members listed their five biggest concerns as: liquidity and access to funds, risk management, financial statement items, maintenance of internal controls and convergence of goals, culture, compliance and risk.

The concerns raised here strike me as being healthy; the days of a board of directors being a "rubber stamp" for management must come to an end, especially for publicly-traded companies. I also applaud KPMG for holding a conference for audit committee members--some may not know what they need to be doing to protect the interest of their shareholders (AND themselves from personal liability if things go wrong with the company that they are overseeing).