Financial reporting, oversight, risk and effectiveness are key areas that pose challenges for audit committees in Bahrain and across the GCC, a KPMG survey has found.

To help identify the pressing challenges facing audit committees, KPMG Gulf Co-operation Council conducted a survey of approximately 100 audit committee members, including several in Bahrain, said a report in the Gulf Daily News (GDN), our sister publication.

The survey captured views on a range of issues including financial reporting and disclosures, audit quality and oversight of internal and external auditors, risk management and crisis readiness, emerging technologies and audit committee effectiveness.

And the results show a broad range of regional trends, shedding light on audit committee's challenges and concerns.

"While the challenges identified in the report are not new, four factors continue to change the game for audit committees," KPMG in Bahrain partner and head of risk consulting Jeyapriya Partiban said.

"They are digitisation, globalisation, increased government regulation, and stepped-up global enforcement," he added.

According to him, these factors are reshaping the business and risk landscape - with significant implication for the audit committee's agenda and potentially its effectiveness.

"Overall, however, the picture from the survey is positive one when it comes to committee's core responsibility - ensuring the integrity of the company's financial reporting," he said.

A majority of the audit committee members surveyed expressed measured confidence in their oversight of financial reporting but less confidence in the accuracy, independence, and objectivity of the external and internal audits.

However, many said the assumptions underlying management's material accounting judgment and estimates could be deeper.

They also suggested that non-audited financial information and pressure that may pose risks to the integrity of financial statement, requires continued attention.

Of the five countries surveyed, audit committee members in Bahrain and Qatar were most confident that their financial reports will present fair, understandable and accurate picture of companies going forward.

The survey showed that audit committees are looking to external auditors for more insight and to the internal audit function to get greater value and a sharper focus on key risks facing the company.

Nearly half of the respondents said they are satisfied that the external audit as well as the internal audit are accurate, independent, objective, and adequately addresses the company's key financial reporting risks.

Lack of evaluation and review of internal and external auditors are a concern, with 23 per cent of respondents stating that the audit committee does not conduct annual evaluation of the external auditor.

Similarly, 19 per cent of respondents said that audit committees do not evaluate internal auditors.

A majority of respondents said they view mandatory audit firm rotation or mandatory re-tendering of the audit work as a way to improve audit quality.

Oversight of risk, including the quality of risk information, crisis readiness and understanding the audit committee's risk oversight role continues to pose challenges.

Only 14 per cent of survey respondents describe the company's risk management programme as "robust and mature," affirmed by the fact that 42 per cent felt either the risk management programme is at planning/development stage or that no active effort has been taken to implement this programme.

As many as 52 per cent of the respondents felt that crisis readiness and response plans were either inadequate, given the company's individual challenge, or unsatisfactory.

This is particularly interesting as many audit committee members said they have oversight responsibility for the company's enterprise risk management process, as well as other major risks facing the company - financial, operational, cyber security and IT risk, globalisation, and legal and regulatory compliance.

When questioned on the audit committee's composition and effectiveness, many responders felt that additional expertise and greater diversity of thinking and background along with formal orientation and ongoing experience and training would bring most improvement. - TradeArabia News Service