Range of Risks
Patrick Quincy who is a former CFO in charge of audit committees indicates that there is uncertainty regarding the role of the committees in risk management. This indicates that members have mostly differed regarding the roles that they are responsible for. There is still a raging debate about the range of risks that the audit committee is expected to cater for. For instance, in a survey undertaken by KPMG on 2000 directors, and committee members it emerged that 35% of those involved were in support of the idea that the audit committee should only be held responsible for regulatory compliance and financial reporting risks ( Lorsch & Simpson, 2009 ). It is, nevertheless imperative to note that a section of 30% of the participants held the opinion that the audit committee should cater for all major risks affecting the organization ( Lorsch & Simpson, 2009 ).
Post Sarbanes-Oxley
Sarbanes-Oxley introduced new standards of financial reporting to improve the financial reporting of Companies. Post-Sarbanes-Oxley, the risks which the audit committee is responsible for have changed owing to increased accountability. Also, by way of seeking to define risk in a manageable perspective. This implies that the management of Companies are constantly seeking to single-out specific risks which they can cater for annually; in which case the most significant risks that the corporation is in charge of is where they are focusing ( Lorsch & Simpson, 2009 ). Also, owing to the Sarbanes-Oxley, Companies have a starting point for analyzing their assets. Besides, the audit committee was now mandated to cater for risks which were initially presumptive ( Cohen, Krishnamoorthy & Wright, 2010 ). In order to be Sarbanes compliant, there is a requirement that all the necessary risks are catered for. Moreover, according to the Protiviti Sarbanes-Oxley Compliance Survey, it was realized that Sarbanes-Oxley contributed to improved audits. Moreover, there was efficient financial reporting owing to the idea that Sarbanes Oxley, sought adherence to all the risks by the audit committee. Besides, with the specifications being made on the role of individuals in the audit process, risk management can now be managed effectively.
Delegate your assignment to our experts and they will do the rest.
References
Cohen, J., Krishnamoorthy, G., & Wright, A. (2010). Corporate governance in the post‐Sarbanes‐Oxley era: Auditors’ experiences. Contemporary Accounting Research , 27 (3), 751-786.
Lorsch, J. W., & Simpson, K. (2009). The Role of the Audit Committee in Risk Oversight.
