Sarbanes-Oxley Ongoing Compliance Guide: Key Processes and Summary Checklists

Risk Management Requires a Well-Informed Audit Committee

The Sarbanes-Oxley Act has placed a spotlight on the audit committee and the increased responsibilities of members as guardians of corporate governance and investors’ interests. In turn, the relationship between the audit committee and executive management (particularly the CEO and CFO) has changed as both groups assume increased responsibility for oversight of the financial reporting process, the assurance of the accuracy and transparency of financial statements, and risk management.

In order to provide effective oversight, the audit committee should expect management, particularly the CFO, to provide the information needed to help members expand their knowledge and awareness of the company’s financial reporting process, including identifying risks and understanding the level of existence of controls surrounding those risks. Members do not need to be inundated with detail, but they should receive enough information to fully understand the company’s compliance strategy and approach. Audit committee members should ensure that they have adequate information in order to make informed decisions. The CEO and CFO should expect the audit committee to reinforce the tone at the top as well as the expectations set by executive management for developing and maintaining strong financial controls and an environment of accurate financial reporting.

Full management support can result in a more effective and focused audit committee and lead ...