Board Committees

The AC should form its own opinion of the quality of the internal and external audit, the internal control system and the annual financial statements (see Swiss Code of Best Practice for Corporate Governance). The AC reports to the Board on its activities and findings. It recommends the Board  the financial statements to submit to the AGM for approval.

The regular reporting obligations incumbent upon listed companies include the duty  to publish annual financial statements as well as interim financial information. The preparation of the financial statements of a (listed) group is demanding process with many technical challenges. A dedicated committee with experienced members supports the Board in fulfilling its supervisory duties.

Oversight risk: Companies have become much more risk-conscious and their management and oversight more risk-driven. Not surprisingly, the audit committee's time commitment in this respect has increased substantially over the last few years. The review of the risk management processes deserves a dedicated place on its agenda.

Assessing the system of internal control: Audit committees play an important role in overseeing an organization's internal control processes. Effective audit committees perform their oversight by demanding relevant, timely and accurate information from management, the internal auditor and the external auditor, and by asking direct and challenging questions.

Reviewing and assessing financial statements: The audit committee has an important oversight role in providing the board with assurance as to the propriety of the financial reporting process. Reviewing and assessing the financial statements remains a critical last step in the committee's financial reporting oversight activities.

Accounting policies, judgments and estimates: Financial transaction and accounting issues have reached an unprecedented level of complexity. Subjective accounting standards and challenging economic and regulatory environments have put a premium on "getting the numbers right".

Fraud and whistle-blowing: The increasing complexity of global organizations – technologies, financial transactions and processes, global supply chains and third party relationships – continue to expand the opportunities for fraud in a variety of areas. Audit committees have to address the various fraud risks head-on ensuring that appropriate safeguards are in place.

Narrative reporting and non-GAAP measures: The integrity of the financial statements and the systems generating the information reported in the financial statements receives a lot of attention from management, internal audit and external audit. The same is not always true for non-GAAP measures and various narrative reporting disclosures provided to investors and other stakeholders.

Auditor selection: The audit committee should be the owner of the auditor selection process and at the end submit a recommendation to the Board for the appointment of a statutory auditor. The selection process must be structured and take into account audit quality as one important criteria. Whereas in the EU firm rotation is mandatory, in Switzerland (as well as in the US for example) it isnt.

Audit committee induction and onboarding: For any new board member – particularly when joining the audit committee – a learning curve comes with the territory. Just how steep that learning curve is and how quickly a new board member is able to contribute meaningfully to committee meetings, depends directly on the quality of the induction and onboarding process.

Chairing an audit committee: Audit committee effectiveness hinges on the chair's effectiveness. A successful audit committee chair should understand the importance of relationships with management, the auditors and other stakeholders.

Effective conversations: Getting the "right conversation" around the audit committee table is an essential component of audit committee effectiveness.

The right information: For audit committees to be truly effective, it is imperative to have both timely access to, and an understanding of, all the relevant information they need to carry out their responsibilities.

Audit committee self-assessment: The audit committee should regularly assess its own performance – and the adequacy of its terms of reference, work plans, forums of discussion and communication – with a view to highlighting skills and/or knowledge gaps and identifying areas in which the committee and its processes might be more effective.

The regular reporting obligations incumbent upon exchange-listed companies include the obligation to publish annual and interim financial statements. The core content of such statements includes comprehensive information on a company’s financial position, net assets and results of operations, along with in-depth statements about corporate governing processes regarding the preparation of financial statements and its related controls.

Robust processes will ensure high quality financial (as well as non-financial) information which is key to good corporate governance.

As we learnt to live with coronavirus, we can reflect on our experiences and draw some conclusions: What were the biggest challenges facing audit committees? Which accounting-related issues were most urgent? And what impact did these have on audits?  Which insights continue to hold true even after the coronavirus crisis subsided?

We discussed these issues with the members of several audit committees.

> Learn more about audit committees during the coronavirus crisis

With many companies having successfully concluded digital AGMs in the COVID-19 era, the revised Swiss stock corporation law now allows new AGM formats. Against this background, the future of the AGM is up for discussion.

While 2023 will, in the absence of COVID-19, see almost all companies return to the old in-person format, it remains unclear what format will emerge in the future. Will we go back to the old format for good, or will we go fully digital?