A new survey by the Financial Executives Institute (FEI) calls for audit committees of company boards to focus on key business risks by challenging management's assumptions even more than they do today, and ensuring the tough questions are asked -- and answered.
On a scale of 1-5, with five being "very effective", survey respondents reported the effectiveness of audit committees at a somewhat unfavorable 2.1 rating. Committee chairs ranked a similar 2.2 rating.
Respondents were also asked to rate the importance of various areas of oversight by audit committees. In order of importance, these areas include:
- Key areas of business and financial risk
- Tone at the top/code of ethics
- Internal controls and systems
- External audit activity and relationships
- Periodic financial reporting, including finance and accounting policies
- Internal audit activity
- Key personnel selection for critical financial/control positions
Results were released in January for the November 1999 survey of 107 chief financial officers and corporate controllers.
What does this information mean for CPAs who function in financial positions for companies and organizations? The FEI says that CFOs want and expect to be challenged on various issues related to the bottom line because they have been trained to respond--and should be the ones to respond--to those who challenge the company.
The FEI has 14,000 members who hold positions as CFOs, treasurers, fund managers and other financial-related jobs. Its company base numbers 8,000.