Report of the NACD Blue Ribbon Commission on the Audit Committee

Effective oversight of financial reporting— even in times of growth and relative calm— is no simple matter for an audit committee. Add in a global financial crisis, economic recession and uncertainty, sweeping regulatory reforms, and unprecedented expectations by investors and regulators for transparency and accountability, and you have one of the most demanding, challenging—and vital—roles in Corporate America.

It’s not a stretch to say that the financial and economic crisis and ensuing volatility and uncertainty in the United States and global markets have put audit committees, and the financial reporting systems they oversee, through a gauntlet. To be sure, some were well prepared—likely buoyed by systems and processes put into place following the Sarbanes-Oxley Act of 2002. Others were less prepared—and the crises exposed critical gaps in their financial reporting systems, oversight processes, or both.

Investors’ and regulators’ expectations of audit committees have always been high; but the demands and challenges facing audit committees have perhaps never been greater: complex accounting rules and regulations, innovative financial instruments, the global nature of businesses, product innovation, pressures on companies to meet expectations and stay competitive—there is little that doesn’t impact a company’s financials. And, as one seasoned audit committee chair often reminds us: If it’s complicated and requires a lot of time and detailed focus, it usually lands on the audit committee’s plate