The business and risk environment has changed dramatically over the past year, with greater geopolitical instability, surging inflation, and the prospect of a global recession added to the mix of macroeconomic risks companies face in 2023.
Audit committees can expect their company’s financial reporting, compliance, risk and internal control environment to be tested by an array of challenges in the year ahead—from global economic volatility and the Russia-Ukraine war to supply chain disruptions, cybersecurity risks and ransomware attacks, and social risks—including the tight talent market. The increasing complexity and fusion of risks, and the unexpected interconnectedness of these risks, put a premium on more holistic risk management and oversight.
In this volatile and opaque operating environment, demands from regulators, investors, and other stakeholders for action as well as increased disclosure and transparency— particularly around climate and other environmental, social, and governance (ESG) risks—will continue to intensify.
Drawing on insights from our interactions with audit committees and business leaders, we’ve highlighted eight issues to keep in mind as audit committees consider and carry out their 2023 agendas:
- Stay focused on financial reporting and related internal control risks—job number one.
- Clarify the role of the audit committee in overseeing the company’s climate and other ESG risks—particularly the scope and quality of ESG/sustainability reports and disclosures.
- Maintain a sharp focus on leadership and talent in the finance organization.
- Reinforce audit quality and set clear expectations for frequent, candid, and open communications with the external auditor.
- Help ensure internal audit is focused on the company’s key risks—beyond financial reporting and compliance—and is a valuable resource for the audit committee.
- Sharpen the company’s focus on ethics, compliance, and culture.
- Stay apprised of global tax developments and risks and understand that tax has become an important element of ESG.
- Take a close look at the audit committee’s composition and skill sets.
BGF Partner in Charge
Harry Widjaja
Partner, Audit & Assurance Services
KPMG in Indonesia
Email: Harry.Widjaja@kpmg.co.id
Harry is a partner in Audit & Assurance Services at KPMG Indonesia. He has more than 17 years of experience in auditing clients, particularly in the automotive, trading and services sectors. Harry is now taking the role as the partner in charge of KPMG Indonesia’s Board Governance Forum (BGF). Outside KPMG, Harry is a member of the Indonesian Institute of Certified Public Accountants (IAPI).