It Isn’t Getting Easier: Deloitte Has Suggestions for the Audit Committee Chair of the Future

Deloitte has published The Audit Committee Chair of the Future, a paper that explores the “emerging trends, challenges, and opportunities that are shaping the role of the audit committee chair.”  Deloitte interviewed audit committee chairs of S&P 500 companies from a range of industries.  Deloitte’s report “draws on their insights to provide practical guidance for navigating complexity and driving positive change.”  Below is a summary/overview of the paper.

​The role of the audit committee chair is evolving. Expectations for audit committee chairs are increasing due to changes driven by emerging risks, technological advancements, and heightened stakeholder scrutiny.  Chairs must “continually adapt, learn, and lead with purpose.”  Audit committee chairs face growing demands and challenges in four key areas:

• Anticipating and navigating emerging risks. Audit committee chairs must adopt a proactive and strategic mindset to oversee an array of risks, including cybersecurity, data privacy, sustainability, AI, and geopolitical shifts. ​ Risk oversight is often assigned to the audit committee, and chairs are expected to manage complex risk landscapes, collaborate with other board committees, and engage with internal and external auditors to address emerging threats. ​ The increasing complexity of the issues for which audit committees are responsible has led to a demand for expertise beyond traditional accounting and finance, including areas such as technology, sustainability, and culture. Audit committee chairs should assess the skills and experience of committee members to determine when to engage external advisors to supplement the committee’s capabilities.

• Evolving from technical experts to strategic leaders.​ The role of audit committee chairs has shifted from compliance-focused to strategic and forward-thinking. ​ Both chairs and committee members need broader business expertise, leadership skills, and a global perspective to address the audit committee’s expanded responsibilities. Specific attributes chairs and committee members should exhibit include intellectual agility and adaptability, leadership and interpersonal skills, global, industry, and strategic perspective, commitment to continual learning, and varied board service.  While having specialists on the board can be valuable, it is not necessary to have a specialist for every topic. Audit committees should focus on a mix of skills and experience​. ​

• Cultivating continual learning and curiosity. ​ Audit committee chairs and members must embrace ongoing education and intellectual curiosity to stay ahead of the rapidly changing risk landscape. ​ Chairs can play a key role in fostering a culture of learning by exhibiting a commitment to education, organizing learning opportunities, and encouraging members to challenge assumptions and share insights. ​ Committee members cannot rest on their existing expertise and should continually refresh their knowledge, stay current with industry trends, and seek out learning opportunities on topics like technology, regulation, and global business dynamics. Chairs should foster a culture in which committee members feel comfortable asking questions, sharing insights, and challenging assumptions, regardless of a member’s expertise in an area.

• Modernizing committee processes for agility. ​ Traditional audit committee structures and processes may need to be reevaluated as demands on the committee change. Structural and process issues that may warrant reconsideration include meeting cadence, committee composition, committee coordination with other committees, the use of technology such as AI to streamline committee processes, and meeting materials. ​ As to the latter, the volume and complexity of materials can make it difficult for committee members to identify key issues. The report offers suggestions as to how chairs might address this problem. ​

​Deloitte’s paper concludes with this observation:

“The ability of audit committees and their chairs to meet future challenges may hinge on their willingness to adapt, improve information flows, foster a culture of open dialogue, embrace continual learning, and engage and equip members to contribute and add value. The most effective audit committees are likely to be those that balance tradition with innovation, leveraging the strengths of their members while remaining agile and responsive to a world of change.”