In this climate, audit committees should be more watchful – FRC

The financial crisis may have receded to somewhat deeper parts of our consciousness, but audit committees shouldn't be fooled into complacency. The UK Financial Reporting Council, which oversees the accounting and audit professions and corporate reporting, has issued a note calling on audit committee to stay vigilant. Some wholesale financial markets remain illiquid and some banks are still dependent of government finance. "Audit committees are likely to want to be convinced that key judgments are supported by a more rigorous and robust analysis than in more benign circumstances and to consider how such matters have been explained in the annual report," it advised. "As part of this process they should set the appropriate expectations of the audit team and management." The document includes a list of key questions that audit committees should be asking, to keep management and internal audit on their toes. First on the list:
Has the Board set out in the annual report a fair review of the company's business including its principal risks and uncertainties? Are the risks clearly and simply stated? Are there many of them and if so, are they really principal risks? Is it clear how the risks might affect the company?

Source document: The FRC update is a seven-page pdf file.